Historic costs methods - long term contracts, Auditing

Historic Costs Methods - Long Term Contracts

You will notice such this exercise is completely dependent on the company estimating its further costs.  This is wherever the auditor has to be extra careful since the directors can distort the accounts through utilizing unrealistic estimates.  Usually, historic costs methods are alternative and inappropriate processes must be adopted.  Therefore they may invloved:

1) Examination of the company's budgetary and budgets system.  Are they such a reliable basis for finding out future costs or do the figures appearing further to be pure guess work.

2) Comparison of the costs to date on the contract along with the real budget whether they relate reasonably, than it will provide some confidence such the future costs are also reasonably stated.

3) Comparison of the conclusions of previous contracts completed along with the real budget to determine the company's capability at forecasting.

4) Perform detailed tests to substantiate the future costs by reference to technical data and reports from several independent personnel.

5) Review the progress of contracts in relative to any penalty clauses for late delivery.  Whether the auditor is satisfied which the future costs are fairly stated, so he should check the estimation of attributable profits, taking into account the matter of prudence on the basis of the points raised previous. Whether it becomes apparent at which completion of a contract a loss will be made, after that a loss should be charged against income in the year then it is foreseen. Whether any profits have previously been taken in the past years they should be written back along with the total loss.

Posted Date: 1/28/2013 12:13:17 AM | Location : United States







Related Discussions:- Historic costs methods - long term contracts, Assignment Help, Ask Question on Historic costs methods - long term contracts, Get Answer, Expert's Help, Historic costs methods - long term contracts Discussions

Write discussion on Historic costs methods - long term contracts
Your posts are moderated
Related Questions

I need a 5 schedules like the sample on the attachment please follow the Instructions you will see in the instructions attachments 4 companies and you have to choose 5th one by yo

Blowing the Whistle on Former Partners On St. Patrick's Day in 1992, Chambers Development Company, one of the largest landfill and waste management firms in the United States, a

Question : (a) Describe the following terms: 1) Forensic Accounting; 2) Forensic Investigation; 3) Forensic Auditing. (b) Explain the basic elements to consider for

Recognize the Related Parties The auditor should review information provided through the management and directors recognize the names of all identified related parties and sho

Advantage and Disadvantage of Judgmental Sampling The advantages of judgment sampling The approach is understood as well and has been refined through experience o

History - True and Fair International Standards on Auditing (ISAs) make it quite clear that the terms 'true and fair' and 'present fairly' which are used in audit reports in m

As per the standard audit engagement letter signed between external financial statement auditor and client/ auditee, auditor's primary role is to detect fraud. Ans: No, the prim

What are Objectives Of Internal Audit? Ans) The purpose of internal audit is to remain proper control over business activities. When there is proper control there is maximum eff

Benefits of Internal Audit are following: It is in-expensive. No charted accounted is needed to audit internally. Faults will be removed before preparing financial stateme