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For example inventory
Case (1) company buys inventory at 100 but market price is 50. Company has correctly done all measurements and payment as per 100.
Case (2) company buys at 50 quotation and purchase order is for 50 but invoice received is 100 due to change in deal approved by director/owner. Then all accounting is done on 100 and subsequent payment is also 100.Inventory in accounts is correct at lower of NRV or cost. I mean everything from accounting point of view is correct but only problem is cost of raw material intentionally purchased at high price.
In tax, there is a concept of transfer pricing but whats in ifrs (ias2 says purchase cost)?
What is responsibility of auditor as per AAA?
In answer to the subject line of this post – short answer – no. “Operational efficiency” (let’s call it that) is solely management’s responsibility.
Cost is cost – if client pays 100 for something that normally costs 50 (say there’s a valid reason – supply and demand just means that on a particular occasion this is what the client had to pay) – 100 is its cost. If NRV were less (but presumably more than 50) it would be written down to 50.
If you’re talking about this as management fraud (maybe the director/owner is “splitting the difference” with the supplier?), the auditor’s responsibility to the shareholders is only in so far as it results in MATERIAL MISSTATEMENT in the financial statements – if not material misstatement, it won’t be reported, if materially misstated it would be reported (but the auditor doesn’t write “and, by the way, this is fraud”).
Employee fraud discovered by the auditor will be reported to management (ISA 265 Communicating Deficiencies in Internal Control to Those Charged with Governance and Management) – management fraud will be reported TCWG (if any). If no TCWG or TCWG were also implicated, the auditor would presumably resign due to client’s lack of integrity.
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