Which of the following is not a reason why the auditor needs to take special care to review significant estimates in the financial statements?
A) Organizations may try to use the estimates to "smooth" earnings.
B) Organizations may create hidden reserves in unusually good years that can be used in years when real profits do not meet expectations.
C) Companies may underestimate liabilities or impairment of asset values to achieve reported earning goals in years when real profits to not meet expectations.
D) Companies may try to overestimate liabilities in computing leverage ratios.

Question

Quizplus · Accepted Answer

The auditor actually needs to take special care to review significant estimates in the financial statements for all the reasons mentioned except for D. Companies would not try to overestimate liabilities in computing leverage ratios as this would make their financial position look weaker.

Which of the Following Is Not a Reason Why the Auditor