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ACCA Strategic Professional · Advanced Audit and Assurance (International) · Audit-related and assurance services

A practitioner is examining a three-year profit projection for Aldgate Foods. Which procedure is most directly aimed at the requirement of ISAE 3400 to assess the support for management's best-estimate assumptions?

Comparing the sales growth assumption with past performance, current orders and independent market data is the most relevant procedure. ISAE 3400 requires the practitioner to assess whether best-estimate assumptions are supported by sufficient appropriate evidence, rather than relying on year-end historical balance testing.

  1. ARecomputing prior-year depreciation on the audited statement of financial position
  2. BComparing the sales growth assumption with past performance, current order books and independent market dataCorrect
  3. CConfirming year-end bank balances with the bank
  4. DAttending the year-end inventory count

Explanation

The practitioner must assess the sources of evidence supporting best-estimate assumptions. Comparing the growth assumption with historical results, orders and external market data tests whether it is reasonable and supportable. The other procedures relate to historical year-end balances rather than future assumptions.

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