Going concern
The directors are responsible for ensuring that the company will contiune in operational existence for the foreseeable future,and report to the members in the published financial statements if this is unlikely to be the case. The auditor will check the accuracy of the directors’ working and assumptions and if these are considered incorrect or inappropriate, then the audit report may be modified or qualified to bring the situation to the attention of the members of the company.
ISA 500 Audit Evidence (Revised) states the management implicitly or explicitly makes assertions relationg to the various elements or financial statements including related disclosures. Auditors may use three categories of assertions to form a basis for risk assessments and the design and performance of further audit procedures. The three categories suggested by ISA 500 relate to (i) classes of transactions,(ii)account balances ,and (iii)presentation and disclosure,One assertion applicable to all three categories is completeness:that all transactions, events, assets ,liabilities, equity interests and disclosures that should be included, are included in the financial statements.
Required:
(a) List and describe SIX financial statement assertions, other than completeness, used by auditors in the audit of financial statements. (6 marks)
(a)Six financial statement assertions
(i) Existence: an asset, liability or equity interest exists;
(ii)Cut of:transactions and events have been recorded in the correct accounting period;
(iii)Occurrence:a transaction or event that has been recorded took place and pertains to the entity during the period;
(iv)Accuracy and valuation:financial and other information is disclosed fairly and at appropriate amounts;
(v)Rights and obligations: the entity holds or controls the rights to assets, and liabilities or obligations of the entity;
(vi)Classification:transactions and events have been recorded in the proper accounts
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