ACCA 上财 审计 chap9.ppt

chapter9 evaluation and review() matters relating to specific accounting issues,topic list fair value inventory and construction contracts tangible non-current assets intangible non-current assets financial instruments investment properties,exam guide,auditing specific statement items and case study,fair value,fair value is the amount for which an asset or liability could be exchanged between knowledgeable, willing parties in an arms length transaction accounting estimates including fair value isa 540 risk procedure audit procedure,inventories,inventories should be measured at the lower of cost and net realizable value costs include costs of purchase, conversion and others incurred in bringing inventories to present location and condition what evidence to obtain about cost, when there is a standard costing system in operation,two objectives:,ensure the standard costing is an appropriate basis for evaluation,ensure the calculation of the standard cost is reasonable,construction contract,a contract negotiated for the construction of an asset or a combination of assets that are closely interrelated or interdependent accounting treatments: recognize contract revenue as an revenue in the period when the work is performed recognize contract costs as an expense in the period in which the work to which they relate is performed any expected excess of costs over revenue should be recognized immediately any costs incurred relating to future activity should be recognized as an asset if it is probable to be recovered when contract revenues collectability is doubtful,they should be recognized as an expense,auditing procedures: verify revenue figures to certification of work completed in year verify cost figures to invoices and ensure that they relate to current period ensure capitalized costs relating to future activity by reviewing invoices and schedules review contract to ensure that capitalized costs are recoverable undertake bad debt review and ensure any debt not collectible has been treated as an expense,tangible non-current assets,valuation of non-current assets impairment of non-current assets non-current assets should be recorded at no more than their recoverable amount. in certain circumstances, assets should be subject to an impairment review. key terms :recoverable amount, a cash-generating unit, value in use,audit approach towards impairment planning (whether necessary) testing obtain the clients workings of the impairment loss consider whether they are reasonable recalculate, to ensure they are correct if possible, verify new value to documentation others see page 236,held for sale non-current assets be presented separately in the statement of financial position be available for immediate sale in its present condition the sale must be highly probable should not be depreciated,audit procedures: discuss with management the availability of asset for sale assess management commitment, e. g . minuted in board minutes evaluate and assess practical steps being taken to sell the asset e.g. appropriate real agents appointed determine when the sale is expected to take place by assessing progress to date,determine and assess the basis on which the sale price has been set discuss with management any significant changes to the plans,intangible non-current assets,an intangible asset is an identifiable non-monetary asset without physical substance. it must be held for using in the production and supply of goods or services, or for rental to others, or for administrative purposes. auditing procedures:,completeness,rights and obligations,valuation,additions,amortization,income from intangibles,goodwill key tests: agree consideration to a sales agreement confirm valuation of assets acquired is reasonable check purchased goodwill is calculated correctly check goodwill does not include non-purchased goodwill impairment test management have carried out annual review assess whether their conclusions are reasonable ensure valuation of goodwill is reasonable,development costs research and development costs definition(ias 38) expenditures on research should be written off in the year of expenditure development cost of a project should be recognized as an asset only when certain criteria are met (ias 38) the amount recognized should not exceed the amount that is likely to be recovered from net future benefits,key auditing procedures on development: check accounting record and confirm project is clearly defined related expenditure can be separately identified confirm feasibility and viability review budgeted revenues and costs review calculations of future cash flows review previously deferred expenditure check amortization,brands key issue: whether it is internally generated or not ias 38 forbids the capitalization of internally generated assets. if a brand has been purchased separately, auditors should test the value of the brand according to the sales documentation,financial instruments,is a contract that gives rise to both a financial asset of one entity and a financial liability or equity instrument of another entity. financial assets and financial liability ias 32/ias 39 recap p240 audit risk see page 241 audit procedure see page 241,investment income in more detail in chapter 10,investment properties,key term on page 243 existence (criteria of isa 40) substantive tests verify rental agreements, ensuring the