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 help with my homework for medical billing and coding can you help?

You are the auditor of ABC Company and the audit process is almost complete. The audit report is due to be signed next week. However, the following additional information on two ma

Prepayments - Audit Process Prepayments similar to accruals are not mostly checked through the double entry system. This creates them susceptible to mistake. The auditor's pro

Action if Management Refuses to provide Representations Whether management rejects to provide a representation which the auditor considers compulsory, this constitutes a scope

Key Audit Areas - Building Society 1. The auditor must examine the process for checking deeds on receipt from the lawyers to ensure such they are complete in accordance along

Reliance on the Work of Other Auditors The principal auditor or the primary auditor is solely responsible for the holding company's accounts. So here it is inevitable but that

what is the role of a joint auditor

With reference to the case study business, plan an audit. You should make specific reference in your plan to: Scope of the audit Materiality Risk factors including fra

The following situations involve a possible violation of the MIA ByLaws (on professional ethics, conduct and practice). For each situation, (1) decide whether or not the Code has b

Questionable Payments In some countries, business is often gained by bribing ministers or public officials or officers of companies or firms with whom one wishes to do business