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Capital allowances vs. Depreciation
Whether the client can prove such they will keep the existing levels of investment in original terms, then there may be justification to accept a reduction of this type of category of deferred taxation although if investments begin to decline after that deferred taxation could be crystallized.The maintenance of existing capital expenditure levels is dependent on the profitability and sales of the company; hence the auditor is used effectively to perform an audit of the profit forecast for at least three years ahead. This would look to be against usually accepted accounting principles that advice against auditing of profit forecasts since in a profit forecast many factors are outside the control of the directors. Inventory levels and Capital expenditure are to a certain extent during the control of the directors. This may look to be a weak argument since profitability affects capital expenditure as well as there is little likelihood of profit whether the directors do not invest prudently, however it may well be during their control to do so. Therefore we only utilized the auditor to assess where profitability is probable to fall or not rise enough to warrant or support plant capital expenditure. So we do not expect him to assess precisely what such profitability is going to be. Evidence is based largely on longer term forecasts and the company's budgets. The process the auditor adopts are as follow:a) Assess the trend of past capital expenditure to see where it is rising or falling or where there is no consistent pattern.b) Assess the company's past profit performance to see where it is falling or rising and compare this performance along with the company's previous budgets and calculates to determine its ability in forecasting as good forecasting in the past gives more confidence for the present.c) Assess the company's capital, profit and cash forecasts for reliability. This includes determining where they have been made on the basis of reasonable data or where they are mere estimate work.d) Examine the directors minutes for evidence of policy changes that might affect future capital expenditure.e) Take into consideration the economic situation mainly as it affects the client's own industry and the company's exposure to labour disruption to economic or legislative changes or components or material shortages.
Communications to Regulatory and Enforcement Authorities The auditor’s professional responsibility to sustain the confidentiality of client information ordinarily prevents repo
Procedures followed in Conducting an Audit Procedures generally followed in conducting an audit by more than one firm of accountants and the division of work between them.
(i) Overview of the audit process (a) Identify the key steps in this framework/ concept. (b) Briefly explain each of the key steps, in your own words. (ii) Framework of cr
Non-Attendance at Stock Takes Whether the auditor is unable to attend a stock take, since he has numerous clients along with the same accounting date, or stock is situate at r
Simple Trust - This type of TRUST is essential to distribute all its income currently, whether or not the TRUSTEE actually does so and it has no provision in trust instrument for c
Ask Describe the weaknesses in internal control and recommend improvements in Swan’s procedures for the purchase, receipt, storage and issue of raw materials. Organize your answer
Counter - Indications That the auditor has found indications of going related to non-applicability does not of itself justify instantly conclusion that the entity is not a goi
Problem: "If the auditor wishes to place reliance on internal control,he should ascertain and evaluate those controls and perform compliance tests on their operation" (a) De
Standard Defines Development and Research The standard defines development and research as follows: (a) Research - planned and original investigation undertaken along with
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