Historic costs methods - long term contracts, Auditing

Assignment Help:

Historic Costs Methods - Long Term Contracts

You will notice such this exercise is completely dependent on the company estimating its further costs.  This is wherever the auditor has to be extra careful since the directors can distort the accounts through utilizing unrealistic estimates.  Usually, historic costs methods are alternative and inappropriate processes must be adopted.  Therefore they may invloved:

1) Examination of the company's budgetary and budgets system.  Are they such a reliable basis for finding out future costs or do the figures appearing further to be pure guess work.

2) Comparison of the costs to date on the contract along with the real budget whether they relate reasonably, than it will provide some confidence such the future costs are also reasonably stated.

3) Comparison of the conclusions of previous contracts completed along with the real budget to determine the company's capability at forecasting.

4) Perform detailed tests to substantiate the future costs by reference to technical data and reports from several independent personnel.

5) Review the progress of contracts in relative to any penalty clauses for late delivery.  Whether the auditor is satisfied which the future costs are fairly stated, so he should check the estimation of attributable profits, taking into account the matter of prudence on the basis of the points raised previous. Whether it becomes apparent at which completion of a contract a loss will be made, after that a loss should be charged against income in the year then it is foreseen. Whether any profits have previously been taken in the past years they should be written back along with the total loss.


Related Discussions:- Historic costs methods - long term contracts

When does an audit trail start, Question: Explain the type of audit con...

Question: Explain the type of audit conducted by the sponsor when he suspects or comes to know that the site will be audited by FDA. A Mention type of audit conducted by the

Explain what further evidence you would seek in relation, 1. On 5 August 20...

1. On 5 August 2012, the financial controller informed you that the board has recently received a letter from the assistant general manager, Mr. Tan. The letter contains a confessi

Explain Statutory Audit, Statutory Audit is a mandatory audit done by a CA....

Statutory Audit is a mandatory audit done by a CA. Finance Audit is conducted by the CA to compliance the legal supplies of monitory issues. If the audit for a business or an orga

Internal control systems, Internal Control Systems ISA 400: “Internal c...

Internal Control Systems ISA 400: “Internal control system” means all the policies and processes (i.e., internal controls) accepted by the management of an entity to assist in

Questionable payments, Questionable Payments In some countries, busines...

Questionable Payments In some countries, business is often gained by bribing ministers or public officials or officers of companies or firms with whom one wishes to do business

Permanent audit file, Permanent Audit File The permanent audit file mig...

Permanent Audit File The permanent audit file might include, inter alia: a) A copy of the enterprise's statutes and other legal or statutory documents governing the enterpri

Business risk approach, Business Risk Approach This approach requires t...

Business Risk Approach This approach requires the auditor to determine what are the very important business risks which the client faces. This line of approach both helps the c

Relevance of audit evidence, Relevance of Audit Evidence The relevance...

Relevance of Audit Evidence The relevance of audit evidence has to be determining in relation to the overall objective of forming a reporting and opinion on the financial stat

Preferred stock valuation, Preferred stock valuation 1. Features of pre...

Preferred stock valuation 1. Features of preferred stock (You may review what you've learned about preferred stock from TCA 221): a. Multiple classes in terms of convertibil

Audit risks, People do not plan to fail, they fail to plan. Planning is an...

People do not plan to fail, they fail to plan. Planning is an essential feature of an effective audit. The most effective plan is one that is reduced to writing, outlining the au

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd