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Hi, sir hope you doing fine.
I wanted to ask whether it is a must for to us include IAS or IFRS standards number we writing the substantive procedures for disclosure.
E.G (research and development substantive procedures)
1. Review the adequacy of the disclosures to assess whether it is in accordance with accounting standard and local legislation2. Review the disclosures for intangible assets in the draft financial statements to
verify that they are in accordance with IAS 38 Intangible AssetsI write the number 1 usually and wanted to know whether will I gain 1 mark or not for the procedure I have written
And sir can you explain the substantive procedure used in the kit which I don’t understand
Perform a proof in total calculation
where I can and where I can’t use this procedure and what it means
Thanks a lot in advance for the help sir.
As indicated by the most recent examiner’s reports – to refer to “reviewing the disclosure is in accordance with accounting standards” is enough – you don’t need to reference IFRS Standards – I don’t think you need to reference “companies act legislation” (or similar) unless it is something that might be prescribed in legislation – e.g. requirements to disclose directors’ remuneration.
“Proof in total” also called “reasonableness test” is a substantive analytical procedure relevant to the assertions of completeness and accuracy of items in profit or loss. It is a calculation of the auditor’s expectation of what an amount should be – if the amount recognised in the financial statements is sufficiently close/within performance materiality, it is materially correct.
Examples (simplified):
Average # of employees on payroll x average weekly wage = salary expense
(Opening cost of a class of PPE + additions – disposals) x depreciation % = depreciation expense
Average monthly overdraft x average borrowing rate for the year = interest expense
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