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

Ticket Id - EM13490296A06, Will I be able to download immediately once I pu...

Will I be able to download immediately once I purchase this assignment?

The internal audit differ from an external audit, Describe How does the int...

Describe How does the internal audit differ from an external audit? Ans) Internal audit nothing but the checking the product that you formed. External audit is checking you

Audit evidence, list four assertions that relate to account balances

list four assertions that relate to account balances

Prepare a memo to the audit work of a firm, Case Study: Hide-It (HI), a...

Case Study: Hide-It (HI), a family-owned business based in Tombstone, Arizona builds custom homes with special features, such as hidden rooms and hidden wall safes. Hide-It has

Online real time systems, List the internal controls that should be in effe...

List the internal controls that should be in effect solely because a EDP system is employed, classifing them as (1) Those controls pertaining to input of information and (2) All ot

Related parties - audit evidence, Related Parties - Audit Evidence IAS...

Related Parties - Audit Evidence IAS 24 prescribes the disclosures essential to the possibility to draw attention which the financial position and loss or profit of an entity

Systems based audit approach, Systems Based audit approach The basis of...

Systems Based audit approach The basis of IAS 400, Risk Assessment and Internal Control. The term systems audit refers to the typical audit approach to medium and large comp

Audit function, Audit Function The audit functions as follows as: 1...

Audit Function The audit functions as follows as: 1. To verify the estimation of timing differences; 2. To ensure such permanent differences have not been got into accou

Control Document, What are the strength of Stock transfer note

What are the strength of Stock transfer note

The business risk approach to auditing, The Business Risk Approach to Audit...

The Business Risk Approach to Auditing In recent years the broader concept of business risk has been developed by the larger firms. It was the subject matter of the ICAEW audit

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