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
Verification Procedures - Investment Verification actions should follow the common approach outlined in favor of tangible noncurrent assets. Conversely the following particula

Statistical sampling – Advantages a) It is scientific and defensible; b) It provides a precise mathematical statement about probabilities of being correct; c) It is efficie

State the FIVE threats contained within Auditor''s Code of Ethics and Conduct and for each threat list ONE example of a circumstance that may create the threat.

Internal Control Procedures: As an auditor, you have discovered the following problems with the accounting system control procedures of Jim's Supply Store. For each of the followin

Management Representations as a Source of Audit Evidence International Standard on Auditing as abbreviated ISA 580 Management Representations gives guidance and standards on t

describe how the auditors would determine that all investments income from shares had been properly recorded in the accounting records

Problem: You are an auditor of a company which operates three large departmental stores at Grand Bay, Port Louis and Tamarin. You are preparing your audit plan and you are p

State four factors considered determining sufficiency of audit evidence

two advantages of an Audit to the shaire holders

Relevance of Audit Evidence The relevance of audit evidence has to be determining in relation to the overall objective of forming a reporting and opinion on the financial stat