Audit of the estimated warranty liability, Auditing

Assignment Help:

Required: Describe a complete audit program for collecting relevant evidence for the audit of the estimated warranty liability.

Approach: Develop specific assertions related to warranty liability based on the five principles.
Ans:

  • Financial statement assertions are the representations of the directors that are embodied in the financial statements. By approving the financials statements, the directors are making representations about the information therein. These representations or assertions may be described in general terms in a number of ways.
  • ISA 500 states the ‘the auditor should use assertions for classes of transactions, account balances, and presentation and disclosures in sufficient detail to form the basis for the assessment of risks of material misstatement and the design and performance of further procedures'.
  • Following paragraphs describes the specific assertions related to warranty liability based on the five principles of quality of audit evidence i.e. External, Auditor, Entity, Written and Originals:
  • External: Audit evidence from external sources is more reliable than that obtained from the entity's records. The assertions from outside sources about the warranty liability are the most factual and real and will be considered at high priority by the auditor.
  • Auditor: Evidence obtained directly by auditors is more reliable than that obtained indirectly or by inference. The direct retrieval of information by the auditor from the management and those charged with governance will be more valid than from indirect resources.
  • Entity: Evidence obtained from the entity's records is more reliable when related control system operates effectively. Next comes the order of entity records if there is strict internal control system operating in the environment.
  • Written: Evidence in the form of documents (paper or electronic) or written representations are more reliable than oral representations. Everything in written is more valued than in verbal. Same is the case with warranty liability. If there exists documentary evidence, then that will be highly acceptable.
  • Originals: Original documents are more realistic than photocopies, or facsimiles. If warranty liability original documents are present then it will be a valid proof of its existence and vice versa.

 


Related Discussions:- Audit of the estimated warranty liability

Involve people in audit, How to involve people in audit? Ans) Use audits...

How to involve people in audit? Ans) Use audits as opportunities to train others. Ask for a volunteer (who is not an auditor) to walk by the audit process with you as an assista

Intangible asserts, Suppose soyola cooking oil company takes over ZamGold c...

Suppose soyola cooking oil company takes over ZamGold cooking oil for an amount in excess of the value $500,000. A) What intangible assert will Soya create in its books which the a

Cloud 9 pty ltd case study, Using the 30 September 2011 trial balance (appe...

Using the 30 September 2011 trial balance (appendix to this case study) calculate planning materiality and include the justification for the basis that you have used for your calcu

Judgmental sampling, Judgmental Sampling The Judgement sampling is wher...

Judgmental Sampling The Judgement sampling is where, auditor using his own experience and awareness of the client's business and situations selects the sample to be tested with

Necessity of transactions with related parties, Necessity of Transactions w...

Necessity of Transactions with Related Parties Transactions along with related parties are essential for several reasons: (a) Several financial scandals including related p

When does an audit trail start, Question: Explain the type of audit con...

Question: Explain the type of audit conducted by the sponsor when he suspects or comes to know that the site will be audited by FDA. A Mention type of audit conducted by the

Assignment , Length: 2000 words Submission method options Alternative submi...

Length: 2000 words Submission method options Alternative submission method Task Question 1 (5%) Case: Battersby and Associates Chartered Accountants is a successful mid-tier ac

Auditing, YvesLaurent has just been put in charge of the BeautyNatural Inc....

YvesLaurent has just been put in charge of the BeautyNatural Inc. audit.BeautyNatural is a small, but growing retail chain of natural cosmetics stores. BeautyNatural needs to borro

ACL Case 3, Sales are shipped FOB shipping point with credit terms n/45. Yo...

Sales are shipped FOB shipping point with credit terms n/45. You have verified that the last shipping number used in 2009 was 261,336 and that numbers were used in numerical order.

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd