The document discusses several key areas that the auditor needs to consider in completing an audit, including:
1) Performing analytical procedures to confirm conclusions on account balances and identify unexpected fluctuations.
2) Evaluating the going concern assumption, including identifying indicators of going concern issues and reviewing management's plans to mitigate problems.
3) Considering the impact of subsequent events on the financial statements and the auditor's report.
4) Identifying and ensuring proper disclosure of contingencies, commitments, and related party transactions.
What are the major steps in a financial statement audit.pdfRathnakarReddy17
A financial statement audit is a formal examination of a company's financial statements. Its goal is to assess whether financial statements fairly and substantially accurately depict business operations and financial situation in compliance with the Generally Accepted Accounting Principles (GAAP) published by the Financial Accounting Standards Board. The income statement, balance sheet, statement of Cash Flow Budgeting and Forecasting in Washington, and other supporting disclosures are all specifically examined by the auditor for accuracy.A financial statement audit must be performed in accordance with GAAP by an impartial external auditor.
What is the procedure for financial statement audit.pdfRathnakarReddy17
The purpose of a financial statement audit is to add credibility to the reported financial condition and business performance. Annual reports must be submitted by all publicly traded corporations and are subject to SEC audits.Similarly, lenders typically require audits of the financial statements of the companies they finance. Suppliers may also require audited Financial Statement Preparation in New York before granting trade credit (usually only if the amount of credit requested is substantial).
What is the Financial Statement Audit Process.pdfsarikabangimatam
A financial statement audit is a review of your financials and related documents by a third-party auditor. This review report is intended to add credibility to our reported financial health and Business Accountants performance. But what happens in this study? Does your business need an audit? We answer all your questions below.
What are the major steps in a financial statement audit.pdfRathnakarReddy17
A financial statement audit is a formal examination of a company's financial statements. Its goal is to assess whether financial statements fairly and substantially accurately depict business operations and financial situation in compliance with the Generally Accepted Accounting Principles (GAAP) published by the Financial Accounting Standards Board. The income statement, balance sheet, statement of Cash Flow Budgeting and Forecasting in Washington, and other supporting disclosures are all specifically examined by the auditor for accuracy.A financial statement audit must be performed in accordance with GAAP by an impartial external auditor.
What is the procedure for financial statement audit.pdfRathnakarReddy17
The purpose of a financial statement audit is to add credibility to the reported financial condition and business performance. Annual reports must be submitted by all publicly traded corporations and are subject to SEC audits.Similarly, lenders typically require audits of the financial statements of the companies they finance. Suppliers may also require audited Financial Statement Preparation in New York before granting trade credit (usually only if the amount of credit requested is substantial).
What is the Financial Statement Audit Process.pdfsarikabangimatam
A financial statement audit is a review of your financials and related documents by a third-party auditor. This review report is intended to add credibility to our reported financial health and Business Accountants performance. But what happens in this study? Does your business need an audit? We answer all your questions below.
Its objective is to determine whether the financial statements fairly and accurately represent business operations and financial conditions in accordance with Generally Accepted Accounting Principles (GAAP) published by the Financial Accounting Standards Board. In particular, auditors comment on the accuracy of the income statement, balance sheet, Cash Flow Budgeting and Forecasting in New Jersey statement and any disclosures that support them. GAAP requires an external independent auditor to audit the financial statements.
Auditing Cayman Funds and Crypto FundsDavid Walker
Presentation by Moore Stephens Cayman for the Cayman Islands Institute of Accountants on International Standards on Auditing for Cayman Funds & Cryptocurrency Funds
In a financial statement audit, a corporation's financial statements are analysed, and disclosures are given to external auditors.
The outcome of this review is an auditor's report demonstrating the adequacy of the financial statements and related disclosures. When distributed to the intended recipients, audit reports must be included with the financial statements.
Financial accounting is a method by which a company records and reports revenue, expenses, and income for a specific period. We follow strict guidelines to ensure that our financial statements are accurate and comply with statutory, financial, legal and regulatory requirements. The data in these reports helps outsiders perform a comprehensive financial analysis of company operations and allocate resources more effectively to business owners, investors, and creditors.
In this presentation, the topics covers are Audit Reports, Audit Certificate, Qualification to become an Auditor, Disclaimers, Adverse Opinion & CARO 2020
FUNCTIONS OF AUDIT - Following are the most important functions o.pdfanupamele
FUNCTIONS OF AUDIT :-
Following are the most important functions of an audit.
1. Study The Accounting System :-It is the basic function of auditing. In order to determine the
nature, timing and extent of the audit procedures auditor should study the accounting system.
2. Internal Control System :-
It is a process which determines that management policies are carried out according the
accounting principles. This system is very useful to safeguard the interest of the enterprise. The
auditor determines the effectiveness of this system. Our company uses to ensure the proper
accounting principles are followed by doing auditing.
3. Vouching :-
This function is essential to determine the accuracy of accounting record. This checking the
vouchers with supporting documents which support and prove the business transactions. All
entries in books of accounts are made on the basis of relevant vouchers.
4. Verification Of Assets :-
It is the function of auditing that it should verify the assets of the business. It is concerned with
the determination of value, ownership and possession of business asset. The auditor can check
the existence of asset.
5. Legal Requirement :-
It is the function of auditing to verify that statements are prepared under the legal requirements
or not. There are various laws like company andincome tax ordinance which are introduced by
the govt.
6. Liabilities Verification :-
The liabilities of the business can be verified from the books of accounts. The auditor can write
a letter to the creditors for the verification of liabilities. The auditor must receive the certificate
from the management in this regard.
7. Capital And Revenue :-
Auditing should make difference between capital and revenue items. The capital items are
compared to note the financial position of the business. The revenue items are compared to
determine the income. The income and expenses related to many years can be divided in current
and coming year.
8. Valuation Of Liabilities :-
Through auditing value of liabilities can be checked from the books of accounts and other
papers. The auditor can also confirm the value from outside sources. The value of liabilities is
given in the balance sheet by the management but it is the function of auditing which confirms
this value.
9. Valuation Of Assets :-
The management gives the value of assets and auditor can apply the accounting principles to
assess the value of assets. The auditor critically examines and takes help from the expert.
10. Reporting :-
Auditing important function is reporting. Auditor is an independent person and it is his duty to
submit his report in writing. If he is satisfied he can present clean report otherwise he can give
qualified report.
Elements of the Generally Accepted Auditing Standards (GAAS)
The generally accepted auditing standards (GAAS) are the standards you use for auditing private
companies. There are 3 elements of GAAS.
General Standards: The first three GAAS are general standards which ad.
Maroof HS CPA Professional Corporation is an accounting firm registered with CPA Ontario & Alberta to perform Compilation of Financial Statements engagements for businesses in both Canada and the United States. They have sufficient industry-level expertise and work to keep their clients out of any disputes or discrepancies related to accounting, bookkeeping and tax filing.More info visit https://www.maroofhs.com/compilation-of-financial-statements-notice-to-reader/
The preparation of financial statements is a key aspect of an organisation's financial management as it relates to the recording and reporting of financial transactions and activities.
Financial statements support decision-making and financial analysis by providing a comprehensive overview of a company's financial performance, position and cash flow.
Its objective is to determine whether the financial statements fairly and accurately represent business operations and financial conditions in accordance with Generally Accepted Accounting Principles (GAAP) published by the Financial Accounting Standards Board. In particular, auditors comment on the accuracy of the income statement, balance sheet, Cash Flow Budgeting and Forecasting in New Jersey statement and any disclosures that support them. GAAP requires an external independent auditor to audit the financial statements.
Auditing Cayman Funds and Crypto FundsDavid Walker
Presentation by Moore Stephens Cayman for the Cayman Islands Institute of Accountants on International Standards on Auditing for Cayman Funds & Cryptocurrency Funds
In a financial statement audit, a corporation's financial statements are analysed, and disclosures are given to external auditors.
The outcome of this review is an auditor's report demonstrating the adequacy of the financial statements and related disclosures. When distributed to the intended recipients, audit reports must be included with the financial statements.
Financial accounting is a method by which a company records and reports revenue, expenses, and income for a specific period. We follow strict guidelines to ensure that our financial statements are accurate and comply with statutory, financial, legal and regulatory requirements. The data in these reports helps outsiders perform a comprehensive financial analysis of company operations and allocate resources more effectively to business owners, investors, and creditors.
In this presentation, the topics covers are Audit Reports, Audit Certificate, Qualification to become an Auditor, Disclaimers, Adverse Opinion & CARO 2020
FUNCTIONS OF AUDIT - Following are the most important functions o.pdfanupamele
FUNCTIONS OF AUDIT :-
Following are the most important functions of an audit.
1. Study The Accounting System :-It is the basic function of auditing. In order to determine the
nature, timing and extent of the audit procedures auditor should study the accounting system.
2. Internal Control System :-
It is a process which determines that management policies are carried out according the
accounting principles. This system is very useful to safeguard the interest of the enterprise. The
auditor determines the effectiveness of this system. Our company uses to ensure the proper
accounting principles are followed by doing auditing.
3. Vouching :-
This function is essential to determine the accuracy of accounting record. This checking the
vouchers with supporting documents which support and prove the business transactions. All
entries in books of accounts are made on the basis of relevant vouchers.
4. Verification Of Assets :-
It is the function of auditing that it should verify the assets of the business. It is concerned with
the determination of value, ownership and possession of business asset. The auditor can check
the existence of asset.
5. Legal Requirement :-
It is the function of auditing to verify that statements are prepared under the legal requirements
or not. There are various laws like company andincome tax ordinance which are introduced by
the govt.
6. Liabilities Verification :-
The liabilities of the business can be verified from the books of accounts. The auditor can write
a letter to the creditors for the verification of liabilities. The auditor must receive the certificate
from the management in this regard.
7. Capital And Revenue :-
Auditing should make difference between capital and revenue items. The capital items are
compared to note the financial position of the business. The revenue items are compared to
determine the income. The income and expenses related to many years can be divided in current
and coming year.
8. Valuation Of Liabilities :-
Through auditing value of liabilities can be checked from the books of accounts and other
papers. The auditor can also confirm the value from outside sources. The value of liabilities is
given in the balance sheet by the management but it is the function of auditing which confirms
this value.
9. Valuation Of Assets :-
The management gives the value of assets and auditor can apply the accounting principles to
assess the value of assets. The auditor critically examines and takes help from the expert.
10. Reporting :-
Auditing important function is reporting. Auditor is an independent person and it is his duty to
submit his report in writing. If he is satisfied he can present clean report otherwise he can give
qualified report.
Elements of the Generally Accepted Auditing Standards (GAAS)
The generally accepted auditing standards (GAAS) are the standards you use for auditing private
companies. There are 3 elements of GAAS.
General Standards: The first three GAAS are general standards which ad.
Maroof HS CPA Professional Corporation is an accounting firm registered with CPA Ontario & Alberta to perform Compilation of Financial Statements engagements for businesses in both Canada and the United States. They have sufficient industry-level expertise and work to keep their clients out of any disputes or discrepancies related to accounting, bookkeeping and tax filing.More info visit https://www.maroofhs.com/compilation-of-financial-statements-notice-to-reader/
The preparation of financial statements is a key aspect of an organisation's financial management as it relates to the recording and reporting of financial transactions and activities.
Financial statements support decision-making and financial analysis by providing a comprehensive overview of a company's financial performance, position and cash flow.
This is a presentation by Dada Robert in a Your Skill Boost masterclass organised by the Excellence Foundation for South Sudan (EFSS) on Saturday, the 25th and Sunday, the 26th of May 2024.
He discussed the concept of quality improvement, emphasizing its applicability to various aspects of life, including personal, project, and program improvements. He defined quality as doing the right thing at the right time in the right way to achieve the best possible results and discussed the concept of the "gap" between what we know and what we do, and how this gap represents the areas we need to improve. He explained the scientific approach to quality improvement, which involves systematic performance analysis, testing and learning, and implementing change ideas. He also highlighted the importance of client focus and a team approach to quality improvement.
The Art Pastor's Guide to Sabbath | Steve ThomasonSteve Thomason
What is the purpose of the Sabbath Law in the Torah. It is interesting to compare how the context of the law shifts from Exodus to Deuteronomy. Who gets to rest, and why?
We all have good and bad thoughts from time to time and situation to situation. We are bombarded daily with spiraling thoughts(both negative and positive) creating all-consuming feel , making us difficult to manage with associated suffering. Good thoughts are like our Mob Signal (Positive thought) amidst noise(negative thought) in the atmosphere. Negative thoughts like noise outweigh positive thoughts. These thoughts often create unwanted confusion, trouble, stress and frustration in our mind as well as chaos in our physical world. Negative thoughts are also known as “distorted thinking”.
The Roman Empire A Historical Colossus.pdfkaushalkr1407
The Roman Empire, a vast and enduring power, stands as one of history's most remarkable civilizations, leaving an indelible imprint on the world. It emerged from the Roman Republic, transitioning into an imperial powerhouse under the leadership of Augustus Caesar in 27 BCE. This transformation marked the beginning of an era defined by unprecedented territorial expansion, architectural marvels, and profound cultural influence.
The empire's roots lie in the city of Rome, founded, according to legend, by Romulus in 753 BCE. Over centuries, Rome evolved from a small settlement to a formidable republic, characterized by a complex political system with elected officials and checks on power. However, internal strife, class conflicts, and military ambitions paved the way for the end of the Republic. Julius Caesar’s dictatorship and subsequent assassination in 44 BCE created a power vacuum, leading to a civil war. Octavian, later Augustus, emerged victorious, heralding the Roman Empire’s birth.
Under Augustus, the empire experienced the Pax Romana, a 200-year period of relative peace and stability. Augustus reformed the military, established efficient administrative systems, and initiated grand construction projects. The empire's borders expanded, encompassing territories from Britain to Egypt and from Spain to the Euphrates. Roman legions, renowned for their discipline and engineering prowess, secured and maintained these vast territories, building roads, fortifications, and cities that facilitated control and integration.
The Roman Empire’s society was hierarchical, with a rigid class system. At the top were the patricians, wealthy elites who held significant political power. Below them were the plebeians, free citizens with limited political influence, and the vast numbers of slaves who formed the backbone of the economy. The family unit was central, governed by the paterfamilias, the male head who held absolute authority.
Culturally, the Romans were eclectic, absorbing and adapting elements from the civilizations they encountered, particularly the Greeks. Roman art, literature, and philosophy reflected this synthesis, creating a rich cultural tapestry. Latin, the Roman language, became the lingua franca of the Western world, influencing numerous modern languages.
Roman architecture and engineering achievements were monumental. They perfected the arch, vault, and dome, constructing enduring structures like the Colosseum, Pantheon, and aqueducts. These engineering marvels not only showcased Roman ingenuity but also served practical purposes, from public entertainment to water supply.
Instructions for Submissions thorugh G- Classroom.pptxJheel Barad
This presentation provides a briefing on how to upload submissions and documents in Google Classroom. It was prepared as part of an orientation for new Sainik School in-service teacher trainees. As a training officer, my goal is to ensure that you are comfortable and proficient with this essential tool for managing assignments and fostering student engagement.
Synthetic Fiber Construction in lab .pptxPavel ( NSTU)
Synthetic fiber production is a fascinating and complex field that blends chemistry, engineering, and environmental science. By understanding these aspects, students can gain a comprehensive view of synthetic fiber production, its impact on society and the environment, and the potential for future innovations. Synthetic fibers play a crucial role in modern society, impacting various aspects of daily life, industry, and the environment. ynthetic fibers are integral to modern life, offering a range of benefits from cost-effectiveness and versatility to innovative applications and performance characteristics. While they pose environmental challenges, ongoing research and development aim to create more sustainable and eco-friendly alternatives. Understanding the importance of synthetic fibers helps in appreciating their role in the economy, industry, and daily life, while also emphasizing the need for sustainable practices and innovation.
2. ~ Compliance with Accounting Std and Companies Act 2016
~ Analytical review on overall performance of financial statements
~ Going Concern status
~ Post balance sheet event, contingencies and commitments
~ Opening balance and comparatives figures
~ Audit of accounting estimates
~ Management representations
~ Related parties transactions
~ Effect of completion issues on audit report
3. Do not relate to specific transaction
cycles or accounts.
Involve many subjective judgments by
the auditor, for example whether to
disclose or not to disclose any matter in
the financial statement.
Often involve issues that are potentially
of high risk to the auditor and require
to draw attention to the user.
After the completion of the substantive test,
auditor need to undertake the overall review
of the financial statements. Result from review
procedures together with conclusion for each
substantive test and test of control, gives the
auditor a reasonable basis to form an opinion
on the financial statement.
This stage usually performed by the
audit manager or senior members
before proceed to engagement partner.
I
N
T
R
O
D
U
C
T
I
O
N
4. The auditor should
consider whether
the information
presented and the
accounting policies
adopted are in
accordance with the
Companies Act 2016
and accounting
standards.
On top of that,
under Co. Act , it
requires a
registered company
to table its annual
financial statements
at the AGM at least
once in every
calendar year and at
interval of not more
than 15 months.
FRS 101
Presentation of
Financial statement
FRS 110
Event after the
balance sheet date
FRS 124
Related party
disclosures
FRS 137
Provisions,
contingent liabilities
& Contingent Assets
5. AI 520 – The auditor should apply analytical
procedures at or near the end of the audit when
forming an overall conclusion as to whether the
financial statement as a whole are consistent with the
auditor’s knowledge of business.
This analytical procedure are intend to re-
confirm with the conclusion made during the
audit of individual account balances.
Analytical procedures
6. Analytical procedures
For example: During substantive test,
auditor concluded that Account
Receivable is fairly stated. When
Analytical Procedure on Account
Receivable is perform and if the result
also conclude that the amount is fairly
stated, looks like the conclusion need to
be re-confirm and it can be a basis for
auditor’s opinion.
Another example: Analytical or
calculation of gross profit margin of an
Oil and Gas company and compared with
the auditor’s knowledge about the
margin in the industry.
When the analytical procedures identify significant fluctuations or
relationships that are inconsistent with other relevant information or that
deviate from predicted amount, the auditor should investigate and obtain
adequate explanations and appropriate evidence.
7. AI 570
Requires the auditor to
assess the risk of going-
concern problems at
the planning stage and
again during the final
review.
Going Concern
assumption is an
important assumption
underlying the
preparation of financial
statements.
Under going concern
assumption, an entity is
assumed to be able to continue
as a going concern for a
foreseeable future period of a
time (at least 12 months
beyond the year-end date).
Accordingly assets and liabilities
are recorded on the basis that the
entity will be able to realize its
assets and discharge its liabilities
in the normal course of the
business.
8. (i) Consider the
appropriateness of the
management’s use of the
going concern assumption in
the preparation of financial
statements.
(ii) Be alert whenever there
are any material
uncertainties about the
entity’s ability to continue as
a going concern that should
be disclosed in the financial
statement.
Auditor’s
responsibility
is to:
The following are indications
that auditor need to be alert for
the going problems:
Operating
indications
Financial
indications
Other
indicators
9. Loss of major market, franchise or principle supplier
Shortage of important supplies
Loss of management personnel
The following are indications that auditor
need to be alert for the going problems:
Operating
indications
10. Net liabilities or net current liabilities
Adverse key financial ratios
Substantial operating losses
Inability to pay creditors as and when fall due
Change from credit to cash on delivery transaction with suppliers
Inability to obtain financing
Arrears or discontinuance of dividends
Difficult in complying with the terms of loan agreements, for example unable to
service interest and principle payment
The following are indications that auditor need to be alert for the going
problems:
Financial indications
11. Pending legal proceedings against the entity
The following are indications that auditor need to be alert for the going
problems:
Other indicators
12. Evaluate whether
the results of
audit procedures
performed during
the course of the
audit provide any
indication of
events or
conditions which
may cause
substantial doubt
If there is
substantial
doubt, the
auditor should
obtain
information
about the
management’s
plan to
mitigate the
going-concern
problem
If the auditor concludes
after evaluating
management’s plans that
there is substantial doubt
about the ability of the
entity to continue as a going
concern, the auditor
consider the adequacy of
the disclosures with respect
to such uncertainty and
include an explanatory
paragraph in the audit
report (emphasis of matter)
Steps to be taken by auditors:
Please refer to table 17-2 (pg 565) for another example of events
indicating going concern problem
13. Factors or situation where
auditor can satisfy with, for
example:-
For the indication liabilities exceed
assets: may be mitigated by
management’s plan to maintain
adequate cash by disposal of
assets, rescheduling the loan,
confirmation for financial support;
For the indication loss of principal:
may be mitigated by availability of
source of supply. So the
availability of stocks enable the
company to still in operation at
least in the next 12 months..
14. • Analyse and discuss cash flow, profit forecast with
management;
• Review events after the period end for item affecting
the entity’s ability to continue as a going concern, for
example the company have increase share capital of
the company;
• Review the terms of the debentures and loan
agreement whether they have been breached;
• Review minutes that relates to financial difficulties
and any action discussed to overcome the problem;
• Inquire of the entity’s lawyer regarding litigation and
claims;
• Obtain Letter for financial support.
When a
question
about going
concern arise
some of the
normal audit
procedures
should be
taken are:-
15. Audit Conclusion and Report (Professional Judgment):-
• Once appropriate evidence has been accumulated, auditor should decide
whether the question about going concern has been satisfactory resolved
and consider the appropriate report:-
Going Concern Assumption Considered By Auditors is
Totally
appropriate and
resolved
No modification of the
report
Appropriate
because of
mitigating
factor
Such plan (mitigating
factor) to be disclosed in
the notes to financial
statement
Auditor report: Unqualified report
with emphasis of matter
If no disclosure on
mitigating factor
(Considered as
disagreement with
management)
Auditor report: Qualified Opinion
(if not so material) or Adverse
opinion (if material)
16.
17. Going Concern Assumption Considered By Auditors is
Inappropriate If the result of the
going concern is
inappropriate
If Not so material – Disqualified
If Material – Adverse
Going Concern Assumption Considered By Auditors is
Not resolved Auditor should
adequately disclose
in the financial
statement about the
uncertainty
If Not so material – Disqualified
If Material – Disclaimer
18. AI 560
• Auditor should consider the effect of subsequent event
on the financial statement and on the auditor’s report.
• Term subsequent events is used to refer to both:
• Events occurring after period end and the date of the
auditor’s report
• Facts discovered after the date of the auditor’s report
FRS 110
• Event after the balance sheet date are those events both
favorable and unfavorable that occur between the
balance sheet date and when the financial statements
are authorized for issue.
19. Management of the
entity has the
responsibility for
establishing policies
and procedures to
identify and account for
subsequent events
Auditor should review
the management’s
procedures to identify
subsequent events and
perform specific audit
procedures designed to
identify subsequent
events
When auditor becomes
aware of subsequent
events which are
material to the financial
statements, the auditor
should determine
whether they have
been properly
accounted for or
disclosed in the
financial statements
20. Reporting date
30 June
End of field work &
Audit report signed
1 August
Financial statements
deliver 15 August
Subsequent events
Subsequent period Post- audit period
1 2 3
21. Period 1
(From Year End,
during the
fieldwork BUT
before signing
Audit Report)
Period 2
(From Signing Date
to Delivery of
financial
statement)
Period 3
(After delivery the
report)
22. Auditors have a responsibility to perform
procedure to discover and evaluate all
subsequent events that may have a material
effect on the financial statements
Make necessary adjustment or disclose in the
financial statement
Period 1
(From Year End,
during the
fieldwork BUT
before signing
Audit Report)
23. Auditors does not have any responsibility to
perform audit procedures. Management are
responsible to inform auditors of facts may affect
the financial statement.
If the auditor becomes aware of a fact which
materially affect, the auditor need to consider
whether the financial statement need
amendment, should discuss with management
and should take appropriate action.
When management amends the financial
statement, auditor should perform additional
audit procedures and dated the financial
statement with the new date.
When management do not agreed to amend the
financial statement in situation where auditor
believe they need to be amended, auditor should
express qualified opinion or adverse opinion..
Period 2
(From Signing Date
to Delivery of
financial
statement)
24. Auditors have no responsibility to perform audit
procedures
If the auditor becomes aware of a fact which
materially affect, the auditor need to consider
whether the financial statement need revision,
should discuss with management and should take
appropriate action.
Period 3
(After delivery the
report)
25. Conditions that did not exist at the balance sheet date but exist
subsequent to that date. If material, need to be disclose in the notes
to the accounts.
Example: purchase or disposal of a major business or subsidiary by
the entity, issue of shares or bonds by the entity,
Please refer to exhibit 17-1 (page 555) for disclosure of non-
adjusting events..
Non-Adjusting events
Adjusting events
NON-ADJUSTING EVENTS
26. Non-Adjusting events
Adjusting events
ADJUSTING EVENTS
These events affect the financial position and the financial statement on
balance sheet date need to accounted for the events..
Example: the bankruptcy of a customer that occurs after the balance sheet date
usually confirms that a loss existed at the balance sheet date on a trade
receivable and the entity needs to adjust
Another example: the sale of inventories after the balance sheet date may give
evidence about their net realizable value at the balance sheet date.
27. Reviewing
procedures
management
policies has
established to
ensure that
subsequent
event are
identified
Reading
minutes of
meeting
Review budget,
cash flow
forecasts and
other
management
report
Inquiring
to
lawyers
Discuss with management on the followings:-
• New Capital commitment and borrowings
• Sales assets
• Issue new shares or debentures
• Any damage of the asset due to fire, flood
Discuss includes
contingent
liability and
capital
commitment
28. Is a potential future
obligation to an outside
party for an unknown
amount arising from
activities that have
already taken place.
A possible liabilities
that arise from the past
events and the
existence will be
confirmed only by the
occurrence or non-
occurrence of one or
more uncertain future
events not wholly
within the control of
the entity
DEFINITION
There
might be a
risk that
they will
not be
completely
and
properly
disclosed
ACCOUNTING TREATMENT
DIFFERENCE
For contingent liability and
provision is that a provision is
recognised as a liability in the
balance sheet whilst a
contingent liability is not
recognised as such
FRS 137
Indicates that
contingent liability is
not recognised as a
liability because its
existence will be
confirmed only by the
occurrence or non-
occurrence of future
uncertain events
29. Material
contingent
liability should
be disclosed in
the financial
statement
Example:
• Corporate guarantee given to lenders for loans to
another party
• Pending litigation or court cases and option to
purchase
Audit Procedures to identify Contingent Liability:-
• Read the minutes of meetings (BOD, Shareholders, committee of board)
and enquiries of management and lawyer
• Review contracts, loan agreements, leases and correspondence
• Review income tax liability, tax return
• Inspect other documents for possible guarantees
Please refer to exhibit 17-2 (page 557) for the disclosure of contingent liability
in the notes to the financial statement
30. Make appropriate inquiries about
litigation and claims is an important
part of completing the audit
These matters may have a material
effect on the financial statements
and thus required to be disclosed in
the financial statements
Legal confirmation letter
Request for confirmation lawyers
for identification of litigation
cases
A legal confirmation letter sent by the
mgmt to the solicitors to provide the
auditor with the following information:
• A list of claims or actions against the
company
• A list of actions brought by the
company
• A list of threatened and impending
litigation and contingent liabilities
Please refer to exhibit 17-3 (page 560) for the example legal letter
31. Often enter into long-
term contractual
commitments to
acquire capital assets
such as plant and
machinery, to purchase
raw material or to sell
their products at a
fixed price
Long term commitments
are usually identified
through inquiry of
management and other
entity personnel during
the audit of the revenue
and purchasing processes
Such commitments
are disclosed in the
notes to the
financial
statements.
DEFINITION
• Is an agreement to commit the entity to a set of fixed conditions in the
future, regardless of what happens to profits or the economy as a whole.
32. Knowledge of both contingencies and
commitments is extremely important to
users of financial statements because they
represent the condition of potentially
material amounts of resources that may be
utilized during future periods, and thus will
affect the future cash flows available to
creditors and investors (users).
Please refer to Exhibit 17-4 (page 561) for example of disclosure on
commitment in the financial statement.
33. The auditor should:
• Obtain sufficient evidence to ensure the opening balance do not contain
misstatement that materially affect the current period’s financial statement
• Ensure it is correctly brought forward from previous period
• Appropriate accounting policies are consistently applied or changes in
accounting policies have been properly accounted for and adequately
disclosed
Refers to those account balances, which
exist at the beginning of the period (closing
balance of last period).
OPENING
BALANCE
34. Comparative
Figures/Amount
AI 710 – Auditor should determine whether the comparatives
comply in all material respects with the financial reporting
framework relevant to the financial statement being audited
FRS 101 – Comparative information shall be disclosed in
respect of the previous period for all amounts
When the presentation or classification of items in the financial
statements is amended, comparative amount shall also be reclassified
unless it is impracticable.
When it is impracticable to reclassify comparative figure, entity should
disclose the reason for not reclassify and the nature of the adjustment
that would have been made if the amount had been reclassified
35. Accounting estimates means:
Allowance
to reduce
inventory
and
receivable
to their
estimated
realisable
value
Depreciation
/
amortisation
Accrued
revenue
Deferred
tax
Provision
for loss
from
lawsuit
Provision
to meet
warranty
claim
Auditor should obtain audit evidence
regarding accounting estimates.
AI 540
It is a management responsible. Sometimes simple and sometimes complex.
For example: accruing rental expenses is simple compared estimating a
provision for a slow moving inventories.
36. AUDIT PROCEDURES
Review and testing the process used by
management
• Evaluate the data and consider of
assumptions used. For example:
Estimating Account receivable.
Review ageing and consider the
accounting policies for doubtful debt.
Specific provision or specific.
• Testing the calculation.
• Compare the estimate of current
period to last period.
Review Subsequent Event
• Subsequent event may provide audit
evidence regarding the accounting
estimate made by management.
• For example: Bankrupt of a customer.
Inventory damages caused by fire…
37. Example of related party transactions:
• Purchase or sales of goods
• Purchases or sales of property and other capital assets
• Rendering and receiving services (management services)
• Leasing and rental arrangements
• Transfer under license agreements
• Financing arrangements such as loans and equity contributions in cash or in
kind
AI 550
Auditor to perform audit procedures to obtain audit evidence
regarding related parties transactions and the effect on the financial
statement.
Should be obtained the information from the client at the completion of audit
stage and to ensure appropriate disclosure in the financial statement.
38. AUDIT PROCEDURES:-
• Review last year working paper to identify related parties and their
transactions
• Review minutes, review corporate structure and discuss with management
• Confirm with the related party, the terms and amount of the transaction
• Discuss with management the purpose and nature of the transaction
• Inspect documentary evidence in the possession of the related party
• AI 550 – auditor to obtain written representation letter from mgmt
concerning:
• a) the completeness of information provided in the financial statements
• b) the adequacy of related party disclosures in the financial statements
Please refer to exhibit 17-5 (page 563) for disclosure of related
party transaction in the notes to the financial statements..
39. AI 580
Requires the
auditor to obtain
appropriate
representations
from
management,
which may be oral
or written
Management
Representation
Letter is a
letter from the
management
to confirm to
the auditor
that all
information (in
all material
respect) has
been properly
disclosed in the
financial
statement and
to be dated on
the same day
the financial
statements are
approved
Important purpose
of management
letter:
• Acknowledgement
by the
management of its
responsibility for
the financial
statements
• Representation by
management as
audit evidence
• To conform the
oral
representation
(documented the
oral
representation)
If mgmt
refuse to
sign the
letter – the
auditor
should
constitute
a scope
limitation,
issue a
qualified
report or
disclaim an
opinion
Example of
Management Letter
Exhibit 17-7
(page 569)…
40. Making an overall final review by
audit manager and partner on
financial statement and should
give a reasonable basis for audit
opinion.
Management Letter
Advise client on the weaknesses
of internal control
List of outstanding
matters
Confirmations on
directors
shareholding and
remunerations
Others outstanding
matters