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Exam AUD topic 1 question 749 discussion

Actual exam question from AICPA's AUD
Question #: 749
Topic #: 1
[All AUD Questions]

Which of the following is not true about accounting estimates?

  • A. Accounting estimates measure the effects of past transactions or events that cannot be determined in a timely cost-effective manner.
  • B. Accounting estimates measure the effects of the present status of an asset or liability.
  • C. An accounting estimate is an approximation of an account pending the outcome of a future event.
  • D. An accounting estimate is an approximation of past events that can be determined on a timely cost effective basis.
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Suggested Answer: D 🗳️
Choice "D" is correct. An accounting estimate pertains to determining the approximation of past events that cannot be determined on a timely, cost-effective basis.
If the effect of a past event can be determined on a timely, cost-effective basis, there would be no reason to make an estimate.
Choices "A", "B", and "C" are incorrect. Accounting estimates may:
A. Measure the effects of past transactions that cannot be determined in a timely cost-effective manner.
B. Measure the effects of the present status of an asset or liability.
C. Be used to approximate an account pending the outcome of a future event (e.g., uncollectible accounts receivable).
by gemazyni at April 5, 2025, 5:04 p.m.

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