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SA 540 (Revised) for accounting estimates requires:
ARisk-based separate consideration of complexity, subjectivity, and other inherent risk factors, with focused procedures on data, methods, assumptions
BReliance on management number only
CSkipping estimates
DUsing only one model
Answer & Solution
Correct answer: B. Reliance on management number only
1. SA 540 (Revised) introduces a more granular risk identification specifically for estimates.
2. Auditor evaluates data, methods (model), assumptions, and recomputation.
3. Indicators of management bias must be considered.
_Source: ICAI BoS CA Final Paper 3, Ch 6 "Standards on Auditing and Professional Ethics"_
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