Immersing in audit

  ISA 550 deals with the auditor’s responsibilities relating to related party relationships and transactions in an audit of financial statements . The objectives of the auditor are to obtain an understanding of related party relationships and transactions to recognize fraud risk factors and conclude, based on the audit evidence obtained, whether the financial statements are affected by those relationships and transactions. This standard requires auditors to perform audit procedures to assess whether relationships, transactions, or balances with related parties are properly accounted for or disclosed in accordance with the requirements of applicable financial reporting principle s.

  Interim financial report means a financial report containing either a complete set of financial statements or a set of condensed financial statements for an interim period. Governments, securities regulators , stock exchanges, and accountancy bodies often require entities whose debt or equity securities are publicly traded to publish interim financial reports. A review, in contrast to an audit , is not designed to obtain reasonable assurance that the interim financial information is free from material misstatement . The auditor’s conclusion is based on the auditor obtaining limited assurance that the interim financial information is free from material misstatement. A review consists of making inquiries and applying analytical and other review procedures. The objective of an engagement to review interim financial information is to enable the auditor to express a conclusion whether, on the basis of the review, anything has come to the auditor’s attention that causes the audi...

  Inventories are assets: (a) held for sale in the ordinary course of business. (b) in the process of production for such sale; or (c) in the form of materials or supplies to be consumed in the production process or in the rendering of services. Inventory is a material item in the statement of financial position of some companies.   Auditors use assertions to consider the different types of potential misstatements that may occur when identifying, assessing and responding to the risks of material misstatements in the financial statements. When auditing inventory auditors focus on obtaining evidence about the following assertions: ·  Existence —inventory really exists and is in proper conditions.  Audit evidence for Inventory ·  Rights —the company holds or controls the rights to inventory. ·  Completeness —inventory that should have been recorded has been recorded, and all related disclosures that should have been included in the financial s...

  The item “ Property, Plant and Equipment ” is often material in the company’s statement of financial position . Revaluation relates to assertions about account balances, and related disclosures, at the period end such as accuracy, valuation and allocation . Why do auditors use assertions? When auditing revalued PP&E auditors may perform the following audit procedures : 1. Considering reasonableness of valuation , reviewing: · The competence, capabilities and objectivity of the expert. · Scope of work . · Methods, assumptions and data used. What is the management`s expert and how does the auditor use the management`s expert work? 2. Checking the valuations are regularly updated . 3. Verifying amounts in the financial statements with the valuer’s report . 4. Confirming the entire class of property, plant and equipment to which that asset belongs is revalued. 5. Reperforming calculation of revaluation surplus . 6. Checking the accounting for the rise or f...

  Alternative procedures are additional audit tests used by auditors when the planned original set of audit procedures cannot be performed or are considered to be ineffective. The original procedures which auditors usually plan to perform to get audit evidence are inspection , observation , external confirmation , recalculation and inquiry. ISAs allow the use of alternative procedures in audit of  inventory , accounts payable , accounts receivable   as well as in the audit of  claims and litigation . For  accounts receivable  balances, the example of alternative procedures is examining specific subsequent cash receipts, shipping documentation , and sales near the period end. For  accounts payable balances,  the example of alternative procedures is examining subsequent cash disbursements or correspondence from third parties, and other records, such as goods received notes. As for  inventory,  in some cases where attendance of audi...

  Intangible asset is an identifiable non‑monetary asset without physical substance. Common examples of intangible assets may include: (a) brand names. (b) mastheads and publishing titles. (c) computer software. (d) licences and franchises. (e) copyrights, patents and other industrial property rights, service and operating rights. (f) recipes, formulae, models, designs and prototypes; and (g) intangible assets under development.   Auditors use assertions to consider the different types of potential misstatements that may occur when identifying, assessing and responding to the risks of material misstatement. Assertions related to item of balance sheet “intangible assets” and the disclosure of information about it are listed below: ·         Existence. ·         Rights and obligations. ·         Completeness. ·      ...