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Thank you smoke, but I do have one more question . .
… Owing to the active participation in international fairs and exhibitions, the export marketing expenses recorded an increase of 143.97% over the last year. There was also a minor increase in other income of 7.97% over the last year, which included a sale of scrap worth RS. 30.53 million in FY2010 [FY2009: RS. 17.98 million].
(Notes 26 and 29, NCL Annual Report, 2010)
Am I doing it wrong ? Although I only took the figures from the notes in annual statement but how else can I refer to that other than the way done ? But it really does feel like I have taken the whole extract from the annual report which is not the case ..Thank you for your comments friends, really appreciate that, but as far as my knowledge guides, in the past exam papers only substantive procedures have been applied as principal audit procedures, but then, my knowledge of P7 isn’t of much substance at all and the exam is less than 2 weeks away : (
Thank you Noeleenred, but I am still not completely happy with it . . Apparently only substantive testing is being applied as principal audit work/procedures, what about the tests of controls ??
Dear , As for the revenue to the capital employed ratio , there is something you need to know , capital employed at its simplest is total assets less current liabilities , or in other words , Non current assets plus the working capital , there are other ways to derive it as well , using this will give you the same result as the examiner’s .
Where as for the gearing ratio , I believe you are doing correctly , because for the gearing ratio to be equal to 3.8 % , equity needs to be 5263 ( 200 / 0.038 ) provided the long term borrowing figure is right or the long term borrowings would need to be 214.7 ( 0.038 * 5650 ) provided the equity figure is correct , both these figures do not appear in the financial statements , so simply apply this ratio on some other question to know that you are doing it the right way and move on .Thank you derrick, but actually i meant to ask that the kd and ke we calculate,are they real required rate of returns or nominal required rate of returns?
WHen a redeemable debt is issued at less than its par value,there are two kinds of returns you are paying to the investor
1)The interest itself
2)The redemption amount which is more than than the value you issued the debenture atIn case of redemption at current market value and in the case of irredeemable debt,there is no difference between issue price and redemption amount,in the former it is the same while in the latter there is no redemption amount,hence it can b concluded that the only return you pay is the interest payments in both these scenarios hence they are treated alike!
Another tid bit,whenever the issue price is at par,the required return and coupon rate would be same,if the issue price is more than par,i.e bond issued at premium,required rate of return is less than the coupon rate and when the bond is issued at discount,the required rate of return is more than the coupon rate
Also,when an irredeemable debt is issued at par value,its required rate of return would also equal its coupon rate.Hope that helps..THanks a lot dear gromit,your post answered 2 queries and raised 2 more!
1.Who is the examiner referring to when he states ‘those charged with governance’?
2.Does it imply that more or less each audit procedure to verify an assertion would either be a test of control or a substantive test?
