This is a crucial auditing standard for all auditors as auditing accounting estimates is not straight forward, involve critical review of assumptions and management’s assessment, and the results have a significant impact on the financials of our audit client. At this juncture, auditor may have to extend the testing of entity-level controls to review for absence of mitigating controls. The extent of our audit testing may be reduced, if the audit client’s entity level controls, including: budgeting process is working effectively. Nevertheless, for the last decade and more, software testing has focused on verification- which implies does it work- rather than validation, that means, does it perform what the customers expect for enjoying a pleasurable customer journey? Because that is exactly what credit terms to customers is, free cash funding in exchange for eventual sales income. In this juncture, items gone through other comprehensive income should be presented as reserve of disposal group.

For instance, asset revaluation reserve of disposal group should be presented on the balance sheet. The answer is simple, business owners are the most fortunate group in this case. To illustrate, if a Group has decided to dispose an entity and management has assessed it meets the criteria of asset held for sale – its asset and liabilities should be presented at gross on asset and liabilities seprately. To illustrate, while reviewing through the debtors’ aging summary of your audit client, you noted a number of debtors has long outstanding debts overdue more than 120 days. To illustrate, your expenses level may stay relatively constant at prior period level. However, given the inflatinonary rate of 5%, should the expenses be higher, assuming volume stay constant? In the field of finance, accuracy, reliability and time management is given so much importance. Some blog readers may wonder, given that budgeting is likely to be related to management accounting, hence, not really related to financial accounting. The first matter we want to discuss relates to the budgeting process of your audit client.

A good audit manager should possess the skill of articulating accounting concept / framework to layman on the street. This is the concept of net realisable value which generally deals with the fluctuation of selling price. For instance, the net book value of a property-plant and equipments are usually different between accounting book and tax book. The answer is no. According to the accounting standard for inventory – the inventories need to be stated at the lower of cost and net realisable value. In reviewing the financial statement of our audit clients, who has recorded the deferred tax, we need to ensure that the Company has disclosed the source of the deferred tax assets / liabilities. The economy is changing rapidly, and the accounting standard is changing from year to year to keep up with the change of economy or financial statement user’s expectation. The organization that develops the structure of the services in such a way so that it can reach the expectation of the client along with its own benefit reaches the peak level.

If there is one industry on its way up, it is technology. There are 47 mutiple choice questions below to test now for all you! With the advent of computerized accounting now a software like HiTech Financial Accounting displays monthly profit and loss account and balance sheet to overcome this limitation. We would like to hear from you on whether did you factor in the inflationary factor, and how did you address that. We would like to understand from you, do you all factor in inflationary rate while factor in the review of income statement, e.g. sales revenue, operating expenses, etc? Pressing Ctrl while dragging duplicates the selected objects. An audit client with no budgeting process in place indicate a relatively higher risk profile of the audit client – as your audit client may not be able to gain the complete picture of the financial affairs of the Company. By talking to our audit clients ( or rather chatting), we will understand that significant business developments, potential changes to the business, significant accounting and auditing issues – all these may help us to identify issues.