Audit and Assurance Practice Exam 2026 – The Complete All-in-One Guide for Exam Success!

Estimates and judgments are fundamental components of the auditing process. In many instances, auditors must rely on estimates, especially when dealing with complex transactions that involve subjective evaluations, such as asset valuations or forecasting future cash flows. These judgments require a high level of professional judgment because the auditor must assess the reasonableness of the management’s estimates based on available data, industry norms, and historical trends.

The use of estimates and judgments can complicate the audit process, as they introduce elements of uncertainty. For instance, the auditor must carefully evaluate the assumptions and methodologies used by management in making these estimates. A large part of the auditor's role is to apply their expertise to determine whether these estimates are reasonable and whether they may materially affect the financial statements. Therefore, the necessity for professional judgment is heightened, as auditors must not only verify calculations but also consider qualitative factors and the context of the financial information.

This involvement is crucial because it can significantly influence the overall audit opinion. It is essential for auditors to document their considerations and rationale, providing a clear basis for their assessments. Thus, the assertion that estimates and judgments may require more professional judgment accurately reflects their crucial role in ensuring the integrity and reliability of the audit.