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Alright! Thanks, John- just had a look and it explained everything there. Thanks for the support!
Okay sir thank you!
However, if I do have any further queries I’ll shall post it here.
Sir would it be correct to say that the full capitalization will only be correct if it meets with the criterion of IAS 38. If that’s not the case then the intangible assets amount is overstated.
If that’s the case then, what would be the correct audit response to it? Because sir we can’t give a vague answer of do this or do that it has to be a specific document that the auditor has to assess or something.
And that’s where i face a major problem when it comes to mention which documents to assess cause i dunno the correct documents to assess.
So sir would be correct if i answered in the following manner:
According to IAS 38, it is permissible to capitalize the R&D cost in full if only the project is feasible and has the funds to complete it. If this is not the case, then the intangible assets in the SFP may be overstated.
And the audit response to it as:
The auditor should obtain sufficient evidence through company’s minutes to ensure that they have sufficient funds to complete the production and it’s feasible in order to be eligible to fully capitalize the R&D cost, if that’s not the case then some of the cost should be written off.
Plus sir is it must that we have to be well acquainted with IAS when it comes to audit risk?
So sir, is it must to relate the scenario with a relevant IAS since the first risk does pertain to an IAS?
Sir, this from the f8 exam kit of bpp. It’s question number 48-titled abrahams that was tested in December 2011.
Sir, there a step by step approach to answering risk question or the approach mentioned above is the only one?
Cause my answers usually turn out to be very general rather than specific.
But the problem arises when i check my answers with the ones at the back they use IAS to explain the implications and i give in general implications so i don’t understand if I’m correct or not. Plus there answers are more professional then ours so it’s confusing.
Example: the questions says
During the year the company has spent $2.2m on developing several new products. Some of of these are in the early stages of development while others are nearing completion. The FD has confirmed that all projects are likely successful and so he intends to capitalise the full $2.2m.
Now how should we respond to the audit risk above with its implication?
And could you indicate how should we start when responding like a technique or a guideline of sorts.
Because sir in our study centre no one is there to help us how to answer questions.
Thanks.