Podcast
Questions and Answers
What is the primary objective of sending confirmation requests to banks or financial institutions?
What is the primary objective of sending confirmation requests to banks or financial institutions?
What is the purpose of reviewing legal agreements or contracts related to statutory funds?
What is the purpose of reviewing legal agreements or contracts related to statutory funds?
What should be disclosed and accounted for when reviewing legal agreements or contracts?
What should be disclosed and accounted for when reviewing legal agreements or contracts?
What is the purpose of verifying the accuracy of transactions impacting statutory funds?
What is the purpose of verifying the accuracy of transactions impacting statutory funds?
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What should be assessed when evaluating custodial arrangements for statutory funds?
What should be assessed when evaluating custodial arrangements for statutory funds?
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What is the purpose of requesting confirmation from regulatory authorities or government agencies?
What is the purpose of requesting confirmation from regulatory authorities or government agencies?
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What is the purpose of inspecting legal documentation related to statutory funds?
What is the purpose of inspecting legal documentation related to statutory funds?
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What is the primary objective of substantive testing and reconciliation in the audit procedure?
What is the primary objective of substantive testing and reconciliation in the audit procedure?
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What should be properly documented and executed according to the audit procedure?
What should be properly documented and executed according to the audit procedure?
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What is the primary objective of the audit procedure for statutory fund member's equity account titles assertions?
What is the primary objective of the audit procedure for statutory fund member's equity account titles assertions?
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What is the role of the auditor in the audit procedure for statutory fund member's equity account titles assertions?
What is the role of the auditor in the audit procedure for statutory fund member's equity account titles assertions?
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Study Notes
Property, Plant and Equipment Existence
- Test additions to ensure capitalized costs correspond to actual existing assets.
- For purchased items, obtain sales invoices or deeds of sale for real properties as evidence.
- For self-constructed assets, verify construction costs by assessing total material and labor expenses.
- Conduct tests on disposals by reviewing deeds of sale or similar documents to confirm the existence of disposal transactions.
Non-Current Asset Account Titles and Assertions
- Accuracy of depreciation expense should be validated through recomputation based on acquisition date, useful life, and salvage value.
- Discrepancies from recomputed depreciation (often using the straight-line method) should be adjusted based on materiality.
- Conduct impairment assessments to determine indicators leading to potential write-downs to recoverable amounts.
- Conduct physical inspections of assets, particularly those pledged as collateral, to verify existence and validate related liabilities.
Other Non-Current Liabilities
- Loan balance verification involves recalculating totals based on repayment terms and interest rates, examining recorded interest expense against anticipated payments, and identifying any impairment signs.
- Review contracts, such as loan agreements and leases, to ensure correct classification of debts (long-term vs. short-term).
- Analyze terms and maturities of liabilities for appropriate balance sheet classification.
- Confirm proper accounting and disclosure of any debt refinancing or restructuring in accordance with accounting standards.
Presentation and Disclosure of Non-Current Liabilities
- Review footnotes in financial statements for complete disclosures on non-current liabilities, including terms, interest rates, and maturities.
- Ensure compliance with accounting standards, such as IFRS and GAAP, regarding non-current liabilities presentation.
- Assess the adequacy and clarity of disclosures to assure relevant information is understandable for users.
Member’s Equity and Share Capital
- The audit process begins with a review of the company's articles of cooperation to understand authorized share capital structure, including types of shares and restrictions.
- Board meeting minutes and resolutions are reviewed to identify any share transactions (issuances, repurchases, conversions) during the audit period.
- Trace capital transactions from source documents—like subscription agreements and stock certificates—to ensure accurate entries in the general ledger.
Existence and Accuracy of Share Capital
- Confirmation requests might be sent to shareholders to verify the existence and accuracy of recorded shareholdings.
- Review of the shareholder register ensures that all recorded shareholders are legitimate and that ownership records are accurate.
- Testing of internal controls related to share capital transactions helps validate the effectiveness of the authorization, recording, and review procedures, which is vital for accurate financial reporting.
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Description
This quiz covers the auditing procedures for testing additions and disposals of property, plant, and equipment, including verifying capitalized costs and construction in progress.
