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Long Term Contracts - Audit Process
The authoritative document with reference to long term contracts is IAS 11: Construction Contracts and IAS 18: Revenue Recognition, and ISA 600 Reliance on the Work of another Auditor.IAS 11 Construction ContractsA construction contract is a contract particularly negotiated about the construction of an asset or mixture of assets that are closely interdependent or interrelated in terms of their technology, design and function or their eventual purpose or needs.That contract often span quite than one accounting time. This provides rise to a number of accounting and hence auditing issues. The auditor must examine a schedule of each the construction contracts such the enterprise is currently engaged in, and reach a decision as to where attribute to capable losses and profits have been satisfactorily estimated.Also the presentation of contracts in the financial statements must accord along with the IAS. Even though the auditor should have a working knowledge to be capable to deal along with many aspects of long term contracts, it may be essential to contact external experts to seek assurance in specialist areas wherever the auditor has not enough expertise himself. Assume an example, determination of the stage of completion of a building in course of construction.
Contingencies and Provisions (i) Receive the client's schedule of provisions and seek and contingencies supporting documentation in the form of legal opinions, correspondence
Non-Attendance at Stock Takes Whether the auditor is unable to attend a stock take, since he has numerous clients along with the same accounting date, or stock is situate at r
Procedures followed in Conducting an Audit Procedures generally followed in conducting an audit by more than one firm of accountants and the division of work between them.
Reliance on the Work of Other Auditors The principal auditor or the primary auditor is solely responsible for the holding company's accounts. So here it is inevitable but that
RELEVANCE OF IAS / IFRS TO AUDITING The auditors should involve in their report that their view on whether the financial statements they report are true and fair view. It is comm
Conformity and Conservatism - External Auditor Report Conformity Although the user of the accounts expects the accounts to conform to general accepted accounting princi
Reference to an expert in the Auditor's Report When issuing an unmodified auditors report, the auditor should not refer to the work of the expert. This is because such a refe
Initial Identification - Intangible Asset Subsequent to initial identification, an intangible asset is carried at: a) Cost, less any accumulated amortization and any accumu
phases of operational auditing reports
Companies Modes of Operation Some companies (especially small ones) operate without any overtly expressed plan and simply carry out the business as always, responding to market
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