According to auditing standards, specific relevant aspects of an internal control system f...

According to auditing standards, specific relevant aspects of an internal control system for making estimates include:

• Management communication of the need for proper accounting estimates.

• Accumulation of relevant, sufficient, and reliable data for estimates.

• Preparation of estimates by qualified personnel.

• Adequate review and approval by appropriate levels of authority.

• Comparison of prior estimates with subsequent results to assess the reliability of the estimation outcomes.

• Consideration by management of whether particular accounting estimates are consistent with the company’s operational plans.

Required:

a. How would the auditor test these control activities over the production of estimates?

b. What substantive audit procedures would the auditor use to test the accounting estimates?