Audit Elective FAE 2012

Username2011 · 30-08-2012 10:54AM

funkymonkey9 wrote: »

Can anyone tell me when revenue should be recognised in the accounts?is it on despatch of goods,is it when the customer signs the delivery docket or is it when we send an invoice?also in terms of services,do we recognise revenue when we've completed the service or when we invoice for it? Thanks

There's no one answer for this. Like everything else, it depends.
Say you work in Easons shop. They will probably recognise the sale when the money is handed over by the customer.
Now say you are Littlewoods and someone orders a book online and you deliver it. The sale is probably recognised when the book is delivered to your house.
Finally, say that you are a construction company and you are building a hospital. And it takes three years to build. And it's the only thing you are working on for those three years, that doesn't mean that you have no revenue for the three years, but rather you recognise revenue on completion of key milestones (e.g. recognise 40% of revenue when 40% of building is done, recognise another 20% when 60% is done etc).

It depends on the terms and conditions of the sale and when the risks and rewards of ownership pass. IAS 18 will set it out for you much better than I can.
Hope that helps

funkymonkey9 · 30-08-2012 11:09AM

Username2011 wrote: »

funkymonkey9 wrote: »

Can anyone tell me when revenue should be recognised in the accounts?is it on despatch of goods,is it when the customer signs the delivery docket or is it when we send an invoice?also in terms of services,do we recognise revenue when we've completed the service or when we invoice for it? Thanks

There's no one answer for this. Like everything else, it depends.
Say you work in Easons shop. They will probably recognise the sale when the money is handed over by the customer.
Now say you are Littlewoods and someone orders a book online and you deliver it. The sale is probably recognised when the book is delivered to your house.
Finally, say that you are a construction company and you are building a hospital. And it takes three years to build. And it's the only thing you are working on for those three years, that doesn't mean that you have no revenue for the three years, but rather you recognise revenue on completion of key milestones (e.g. recognise 40% of revenue when 40% of building is done, recognise another 20% when 60% is done etc).

It depends on the terms and conditions of the sale and when the risks and rewards of ownership pass. IAS 18 will set it out for you much better than I can.
Hope that helps

So when someone places an order say with littlewoods what are the accounting entries?then when it's delivered what are the entries?do the risks and rewards pass when the item is delivered or when we get a signed delivery docket because customers can refuse to accept delivery if goods don't match their order etc?thanks for the help!

alphacalc · 30-08-2012 11:21AM

funkymonkey9 wrote: »

So when someone places an order say with littlewoods what are the accounting entries?then when it's delivered what are the entries?do the risks and rewards pass when the item is delivered or when we get a signed delivery docket because customers can refuse to accept delivery if goods don't match their order etc?thanks for the help!

It would depend on the product and the underlying T & C of the sale; there's not a "one fits all" answer with Revenue Recognition.

Username2011 · 30-08-2012 01:23PM

alphacalc wrote: »

It would depend on the product and the underlying T & C of the sale; there's not a "one fits all" answer with Revenue Recognition.

Yep. The case should specify when they recognise revenue so you'll have to apply it then. For example, if they recognise it on delivery, when the GDN is signed by the customer, you'd cr revenue then. But if they recognise it on dispatch, you'd cr revenue when it leaves the warehouse.

figrolls · 30-08-2012 02:26PM

Could anybody clear up a few things on ISRE 2410 Interim Reviews for me

PLC's are required to have six monthly reviews - would this be the appropriate type of engagement for this or does that require a full audit every six months?

Are we required to report to the financial regulator as a result of this review - eg internal control weaknesses, if the report is modified in some way etc

Are we required to report to the relevant authorities in relation to fraud if one comes to our attention during an interm review/ mangement informs us of one such as reporting to the guards?

figrolls · 30-08-2012 06:17PM

anybody any ideas on the above??

KenHy · 30-08-2012 06:34PM

Yes ISRE 2410 is the relevant guidance for Interim "audits" (technically not an audit at all but a review engagement)

It doesn't effect any reporting obligations you have as you are still the auditor. (as in you still have to comply with reporting requirements the same as if you unearthed the information during the full audit)

figrolls · 30-08-2012 07:12PM

KenHy wrote: »

Yes ISRE 2410 is the relevant guidance for Interim "audits" (technically not an audit at all but a review engagement)

It doesn't effect any reporting obligations you have as you are still the auditor. (as in you still have to comply with reporting requirements the same as if you unearthed the information during the full audit)

That was kinda my thinking on it but wasnt too sure - thanks for clearing that up for me! Cheers!

figrolls · 30-08-2012 08:19PM

Im having a bit of a brain freeze here at the moment, maybe somebody can enlighten me...

ISAE 3000 reviews of historical financial information

When would this ever happen in real life - an audit exempt company looking for a report for banking purposes maybe??

Im just trying to figure if this could come up as a question as theres not much else they could put with it really....

faer2203 · 30-08-2012 08:28PM

figrolls wrote: »

Im having a bit of a brain freeze here at the moment, maybe somebody can enlighten me...

ISAE 3000 reviews of historical financial information

When would this ever happen in real life - an audit exempt company looking for a report for banking purposes maybe??

Im just trying to figure if this could come up as a question as theres not much else they could put with it really....

I think it could be like internal controls, complaince with grants, that kinda situation,

On a seperate note, in chemical sisters case, does anyone know why the discontinued operation is not adjusted as it happened in June 2011 and the year end was June 2011?

figrolls · 30-08-2012 08:35PM

faer2203 wrote: »

I think it could be like internal controls, complaince with grants, that kinda situation,

Just googled it and got this on the IFAC website, thanks!

ISAE 3000 (Revised) establishes basic principles and essential procedures for all assurance engagements other than audits or reviews of historical financial information covered by ISAs and ISREs, for example, assurance engagements regarding:

•Environmental, social and sustainability reports;

•Information systems, internal control, and corporate governance processes; and

•Compliance with grant conditions, contracts and regulations.

I still would have probably but those into ISRS 4400 agreed upon procedures though....

faer2203 · 30-08-2012 08:55PM

figrolls wrote: »

Just googled it and got this on the IFAC website, thanks!

ISAE 3000 (Revised) establishes basic principles and essential procedures for all assurance engagements other than audits or reviews of historical financial information covered by ISAs and ISREs, for example, assurance engagements regarding:

•Environmental, social and sustainability reports;

•Information systems, internal control, and corporate governance processes; and

•Compliance with grant conditions, contracts and regulations.

I still would have probably but those into ISRS 4400 agreed upon procedures though....

Yeah theres such an over lap, very hard to know which one to use

notanocelot · 30-08-2012 09:03PM

faer2203 wrote: »

Yeah theres such an over lap, very hard to know which one to use

ISAE 3000: You have the ability to follow up on things you've found and perform extra procedures.

Agreed-upon procedures you state every test you're going to do in the engagement letter and you do absolutely nothing else.

If we come across a question where it would be practical do either, just state your assumption and move on. Internal controls wouldn't work for agreed-upon procedures because you have to first make the inquiries and secondly perform tests of controls upon the controls you've discovered exist. Meanwhile grant claims do work for agreed-upon procedures.

Mat85 · 30-08-2012 09:16PM

Im nearly sure ISRS4400 wasn't on the course last year and thats why it wasn't referenced in the report.

faer2203 wrote: »

figrolls wrote: »

Just googled it and got this on the IFAC website, thanks!

ISAE 3000 (Revised) establishes basic principles and essential procedures for all assurance engagements other than audits or reviews of historical financial information covered by ISAs and ISREs, for example, assurance engagements regarding:

•Environmental, social and sustainability reports;

•Information systems, internal control, and corporate governance processes; and

•Compliance with grant conditions, contracts and regulations.

I still would have probably but those into ISRS 4400 agreed upon procedures though....

Yeah theres such an over lap, very hard to know which one to use

figrolls · 30-08-2012 09:41PM

Im confused....

I hope we just get PFI as thats a much more clear cut situation!

With regard to M42,ISRS 4410 and ISRE 2400 - sean murray said that the wrong version is in the toolkit, is there much differences between these and the correct versions??

I had a quick glance on chariot and couldnt see a massive difference so didnt print them out but now im wondering if I should...

KenHy · 30-08-2012 11:55PM

M42 is quite different I think, certainly when I started going through it not knowing that it was the wrong one I picked up very quickly that it wasn't corresponding with what I already knew an looked it up and found out it wasn't the examinable document. - never even looked at the wrong versions of the other two, so no idea there!

What notanocelot said for ISAE 3000! - It's kind of an overview document though - there are quite a few ISAE standards that deal with more specific engagements which build on ISAE 3000- of which ISAE 3400 (perspective financial information) is the only examinable one. I think it's probably unlikely that they' actually ask anything on ISAE 3000 directly as most conceivable scenarios already have some guidance published - it's just not examinable. ISAE 3000 is necessary (in theory) to properly understand ISAE 3400 which is probably why it's on the competency statement to start with.

zamaramo99 · 31-08-2012 09:55AM

Hey guys, Could someone please attach a copy of the 2012 Mock paper and solution.

Thanks.

dee359 · 31-08-2012 06:00PM

Re reporting to 3rd parties- silly question maybe but can't find it stated anywhere in my notes.

Can anyone confirm which engagements require independence ie. where u cannot be the firm's auditors as well? Is it when reasonable assurance is given as opposed to limited assurance? Thanks in advance.

Ex 88 · 31-08-2012 06:10PM

dee359 wrote: »

Re reporting to 3rd parties- silly question maybe but can't find it stated anywhere in my notes.

Can anyone confirm which engagements require independence ie. where u cannot be the firm's auditors as well? Is it when reasonable assurance is given as opposed to limited assurance? Thanks in advance.

Agreed upon pro isrs4400 and engagement to compile financial info isrs4410! But u have to disclose you're not indepen in the report

dee359 · 31-08-2012 06:19PM

Ex 88 wrote: »

Agreed upon pro isrs4400 and engagement to compile financial info isrs4410! But u have to disclose you're not indepen in the report

Thanks a mil. So independence not required with those two and need to say in report if not independent for ISREs and ISAEs?

Username2011 · 31-08-2012 06:22PM

Ex 88 wrote: »

Agreed upon pro isrs4400 and engagement to compile financial info isrs4410! But u have to disclose you're not indepen in the report

Wait so if we're auditors, we can't do agreed upon procedures as well? Why is that?? I didn't see that in the standard

Ex 88 · 31-08-2012 07:05PM

You dont have to be independent in Isrs 4410 para 5 and isrs 4400 para 7?

notanocelot · 31-08-2012 07:18PM

You do NOT have to be independent.

You just have to state that you're not independent in the report.

figrolls · 31-08-2012 07:45PM

notanocelot wrote: »

You do NOT have to be independent.

You just have to state that you're not independent in the report.

Sorry Im just a bit confused.....

Does this mean that the financial statement auditor can perform any of these reports - ISAE 3000, ISAE 3400, ISRE 2400, ISRE 2410, ISRS 4400 and ISRS 4410??

and in ISRS 4400 and 4410 we have to disclose this fact?

Or is complete independence required from all reports expcept ISRS 4400 and 4410 in which it has to be disclosed?
and is this independence in terms of not auditors or in terms of family etc??

Sorry if that doesnt make sense, im a bit confused...

dee359 · 31-08-2012 09:01PM

figrolls wrote: »

notanocelot wrote: »

You do NOT have to be independent.

You just have to state that you're not independent in the report.

Sorry Im just a bit confused.....

Does this mean that the financial statement auditor can perform any of these reports - ISAE 3000, ISAE 3400, ISRE 2400, ISRE 2410, ISRS 4400 and ISRS 4410??

and in ISRS 4400 and 4410 we have to disclose this fact?

Or is complete independence required from all reports expcept ISRS 4400 and 4410 in which it has to be disclosed?
and is this independence in terms of not auditors or in terms of family etc??

Sorry if that doesnt make sense, im a bit confused...

I'm very confused as well. If i remember correctly, In the mock this year we were the auditors but we still carried out the engagement re prospective fin info. Is it just a matter of having a different engagement partner working on the assurance engagement (or the usual other safeguards) I wonder?

funkymonkey9 · 01-09-2012 11:27AM

Has anyone found the elective cases tricky in terms of how far you have to go in an indicator?for example red Ireland,in the case it asks you to outline the key considerations and issues for us as principal auditors to be sent to the component auditors,the solution looks at group engagement team responsibilities,understanding the component auditor,setting materiality and then the communication with the component!also in the last indicator they explain how to account for the investment properties (as was asked in the case)but then they go further and describe the specific procedures to do on the investment properties which to me wasn't even a non directive indicator in the case!how do you know how much detail to go into?

KenHy · 01-09-2012 12:27PM

funkymonkey9 wrote: »

Has anyone found the elective cases tricky in terms of how far you have to go in an indicator?for example red Ireland,in the case it asks you to outline the key considerations and issues for us as principal auditors to be sent to the component auditors,the solution looks at group engagement team responsibilities,understanding the component auditor,setting materiality and then the communication with the component!also in the last indicator they explain how to account for the investment properties (as was asked in the case)but then they go further and describe the specific procedures to do on the investment properties which to me wasn't even a non directive indicator in the case!how do you know how much detail to go into?

I think anytime you get asked how to account for something then that goes hand in hand with explaining how to audit it too.

Norman123 · 01-09-2012 02:27PM

Theres only days left til this kick off!

What are peoples plan for the last few days before the exam???

I've went through all cases, lectures and notes but am just unsure where my time will be best spent for the run up to this thing...Any suggestions??

06431755l · 01-09-2012 02:52PM

Hey does anybody know did we get a draft rep letter to use in ROI?

There is one in the appendix at end of isa 540 but i have wrote beside it "do not use, NI only"?

Thanks a mil.

figrolls · 01-09-2012 02:54PM

06431755l wrote: »

Hey does anybody know did we get a draft rep letter to use in ROI?

There is one in the appendix at end of isa 540 but i have wrote beside it "do not use, NI only"?

Thanks a mil.

Pg 131 of the audit elective book

Audit Elective FAE 2012

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