Can you explain the auditing procedures on accounting estimates?

True and fair view in auditing means that the financial statements are free from material misstatements and faithfully represent the financial performance and position of the entity.

Although the expression of true and fair view is not strictly defined in the accounting literature, we may derive the following general conclusions as to its meaning:

True suggests that the financial statements are factually correct and have been prepared according to applicable reporting framework such as the IFRS and they do not contain any material misstatements that may mislead the users. Misstatements may result from material errors or omissions of transactions & balances in the financial statements.

Fair implies that the financial statements present the information faithfully without any element of bias and they reflect the economic substance of transactions rather than just their legal form.

Although the expression of true and fair view is not strictly defined in the accounting literature, we may derive the following general conclusions as to its meaning:

True suggests that the financial statements are factually correct and have been prepared according to applicable reporting framework such as the IFRS and they do not contain any material misstatements that may mislead the users. Misstatements may result from material errors or omissions of transactions & balances in the financial statements.

Fair implies that the financial statements present the information faithfully without any element of bias and they reflect the economic substance of transactions rather than just their legal form.

This is very great question and thank you for it.

I will explain the auditing on Accounting Estimates in the following points:

• Definition: Accounting Estimates: Historical Cost: Accounting estimates in historical financial statements measure the effects of past business transactions or events, or the present status of an asset or liability.
• Definition: Accounting Estimates: Fair value: An approximation of a monetary amount in the absence of a precise means of measurement. This term is used for an amount measured at fair value when there is estimation uncertainty, as well as for other amounts that require estimation.

Procedures:

-the auditor should obtain an understanding of "How management makes the accounting estimates and the data on which they are based" to provide a basis for the identification and assessment of the risks of material misstatement for accounting estimates.

- The  auditor  should  review  the  outcome  of  accounting  estimates  included in the prior period financial statements or, when applicable, their subsequent re-estimation for the purpose of the current period.

- the auditor should evaluate the degree of estimation uncertainty associated with an accounting estimate.

- Based  on  the  assessed  risks  of  material  misstatement,  the  auditor should determine:a.whether  management  has  appropriately  applied  the  requirements of the applicable financial reporting framework relevant to the accounting estimate and;b.whether the methods for making the accounting estimates are appropriate  and  have  been  applied  consistently  and  whether changes  from  the  prior  period,  if  any,  in  accounting  estimates or the method for making them are appropriate in the circumstances.

-further substantive procedures to respond to significant risks related to accounting estimates.

- Recognition and Measurement Criteria for accounting estimates.

- The auditor should evaluate, based on the audit evidence, whether the accounting estimates in the financial statements are either reasonable in the context of the applicable financial reporting framework or are misstated.

- The auditor should obtain sufficient appropriate audit evidence about whether the disclosures in the financial statements related to accounting estimates are in accordance with the requirements of the applicable financial reporting framework.