CHAPTER 5 - AUDIT REVIEW
"Go Confidently in the direction of your dream live the life you've imagined"
What's up guys, We're from Group 5!
An audit refers to the systematic and intelligent examination of the books of accounts of an entity to check whether they present true and fair view or not. A review refers to an evaluation of the financial books, conducted by the auditor, to determine if there are any chances of modifications or not.
For more information, do watch the video below:
Refer to slide for more information and knowledge;
Question:
Group 1- Identify the suitable procedures to handle subsequent event.
Group 2- Define the subsequent event and after balance sheet event.
Group 3- Give an effect of subsequent event on the financial statement.
Group 4- Differrentiate between the subsequent event and after balance sheet event.
Group 6- Give the final step in completion of an audit.
Group 7- Give an example for subsequent event and after balance sheet event.
Group 8- Discuss the auditors responsibilities upon completing the audit.
Comments
2. Purchase of a business
3. Settlement of litigation when the event giving rise to the claim occured after the balansheet date
4. Loss of plant or inventory as a result of fire, flood, earthquake or other major casuality
5. Losses on recevable resulting from conditions such as customer major casuality arising subsequent to the balance sheet date
After balance sheet event - indicative of conditions that arise after the reporting date
- Events occuring between the date of the financial statements and the date of the auditor’s reports and facts that become known to the auditor after the date of the auditor’s report.
After balance sheet event
- Favorable and the unfavourable that occur between the reporting date and the date when the financial report is authorized for issue.
1)Additional information
2)New events
• ENSURE SUFFICIENT AUDIT EVIDENCE HAS BEEN OBTAINED
• ENSURE COMPLIANCE WITH APPLICABLE APPROVED ACCOUNTING STANDARDS AND STATUTORY REQUIREMENTS
• ENSURE PROPER DISCLOSURE WITH COMPANIES ACT 2016 AND APPLICABLE APPROVED ACCOUNTING STANDARDS IN MALAYSIA
• ENSURE CONSISTENT APPLICATION OF ACCOUNTING POLICIES
• ENSURE THE APPROPRIATENESS OF ACCOUNTING TREATMENTS
• REVIEW THE FINANCIAL STATEMENTS DISCLOSURES FOR CONSISTENCY AND REASONABLENESS
• ENSURE THE DISCLOSURES ARE CONSISTENT WITH MANAGEMENT ASSERTIONS AND FAIR
• ENSURE PROPER COMPLETION OF THE RELEVANT CHECKLIST AND QUESTIONNAIRES PERTAINING TO THE AUDIT
Clearly the fraud committed by the payables ledger clerk has been ongoing during, and beyond the financial year. Fraud, error and other irregularities that occur prior to the year-end date – but which are only discovered after the year-end – are adjusting items, and therefore the financial statements would require amendment to take account of the fraudulent activity up to the year-end.
2. Legal proceedings
At the year-end, the company had made disclosure of a contingent liability. However, subsequent to the year-end (29 October 2010), the court found the company liable for breach of contract. The legal proceedings were issued on 20 September 2010 (some 10 days before the year-end). This is, therefore, evidence of conditions that existed at the year-end. IAS 10 requires the result of a court case after the reporting date to be taken into consideration to determine whether a provision should be recognised in accordance with IAS 37, Provisions, Contingent Liabilities and Contingent Assets at the year-end. In this case, the financial statements will require adjusting because:
the conditions existed at the year-end
the recognition criteria for a provision in accordance with IAS 37 have been met.
3. Loss of customer
A customer ceasing to trade so soon after the reporting period indicates non-recoverability of a receivable at the reporting date and therefore represents an adjusting event under IAS 10, Events After the Reporting Period. Assets should not be carried in the statement of financial position at any more than their recoverable amount and, therefore, an allowance for receivables should be made.