AQRM Red Flags: Changes in Accounting Estimates

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Madeleine Conley, Audit Analytics

Changes in accounting estimates can be a significant accounting quality red flag. Management can use its discretion when determining appropriate estimates for calculating the value of many accounts, like property, plant and equipment (PPE). As part of the AQRM database, Audit Analytics flags firms disclosing changes in estimates and assign severity based on where the estimate affects the financial statements, as well as the net effect; higher line items and positive changes increase severity.

In this article, Audit Analytics further examines the significant changes in accounting estimates related to PPE for 2020.

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