Audit and Assurance: Documentation

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The dominant role of civil law in the private law

B. The dominant role of civil law in the private law

Civil law dominates the private law. This predominance is explained by the extent of his domain. It covers all the individuals and all the activities. Civil law was the law of life, the right money, the right of the flesh. Civil law was the law of the passions in both senses of the term (craze and suffering).

Civil law is dominated by its coherence. Although it is undergoing many reforms, it retains its intellectual and material unit since civil law is codified in a civil code. Hence explains the predominance of civil law which makes the law. We perceive that the other branches of private law are exceptional. It will be a fragmented specific regulations, absences are filled by the rules of civil law.

The specificity of the branch in question has not seen fit to any rule of civil believed. And employment law when you want to obtain the annulment of the contract, the rules of the civil code is applied, including the vices of consent theory.

As the civil law is the common law, it influences other branches of law. The theory of abuse of rights arose about the ownership that has spread in commercial law with the abuse of majority or minority in commercial companies.

This theory has also extended labor law with the concept of abuse of the right to strike. But as influence is sometimes mutual. One can observe that contract law has benefited from loans made to specific rules in the employment contract or today consumer law or competition.

The regulatory environment for consolidated accounts.

The training program:
1 / Mastering the regulatory framework for consolidation

    The regulatory environment for consolidated accounts.
    The main differences between French GAAP and IFRS.

2 / Determine the scope of consolidation

    The different types of control: exclusive, spouses and significant influence.
    IFRS approach control.
    Exclusions from the scope.

3 / consolidation methods

    Methodology of global integration.
    Methodology of the equity.
    Methodology of proportional consolidation.

4 / Organizing consolidation

    The mode of organization: centralized or decentralized process.
    The process steps.
    The method flows or cumulative.

5 / Make the restatement entries

    Required restatements.
    The preferred methods.
    Other options.

6 / Eliminate the effect of inter-company transactions

    Transactions without impact on consolidated results.
    The operations with impact on the consolidated result:
        dividends; provisions; inventory margins; Capital gains on disposals.

7 / Recognize deferred taxes

    Identify the bases of deferred taxes.
    Perform the calculation and monitoring.
    Carry proof of tax.

The dilemma of deferred tax assets DTA.

We were waiting for the resolution of the ICAC on income tax (Resolution of 9 February 2016, the Institute of Accounting and Auditing, laying down the rules for registration, evaluation and preparation of the annual accounts for the accounting develop tax Benefits), which replaces the previous one dating from 1997 (Resolution of 9 October 1997 the Institute of Accounting and Auditing, on some aspects of the Standard Valuation sixteenth general accounting plan) was obviously very antiquated.

One of the main problems accounting Tax Benefits is the recognition of deferred tax assets or "Deferred Tax Asset" (DTA) and hoped that the new resolution take us out of doubt.

However, in my opinion, the content of the resolution on this issue, has not solved the problem, perhaps because it has a single solution, but many solutions and depends on many circumstances, which can not include all in one standard and can not be parameterised. Anyway the new resolution leaves us many doubts, we will thresh below.

Role and require skills of an Accounting Assistant

The assistant accountant is a versatile employee in SMEs. Its main role is to assist the accountant in the actions to be taken in accounting.

Opportunities for career development are great. Accounting Assistant provides access to the accounting profession in commercial and industrial companies.

Note that you need a good knowledge of information technology, including the use of accounting software (Payee Heaven, Heaven Accounting and other ERP) but also for office software like Microsoft Office (Word, Excel).

This training is for a beginner in public accounting:

Reporting Issues with Warehouse Management

Please note that I will be on leave from the 15th May, 2016 till the 17th May. During my absence, please communicate with the respective super/ key users for arranging any meetings or other project related issues. Since I will be traveling, I will have limited access to Internet and might not be able to respond you via email instantaneously. However, you’ll be able to reach me in my cell phone. Looking forward to your cooperation in this regard.

Please find the attached file and we would like to inform you, packing materials plastic measuring cup-10ml code no-2133 actual opening stock is 467, and actual closing stock is 360500 units.Due to our software problem we are unable to solve the error quantity.

Today is 23th of the month! On 6th of this month, I have requested XLS (Excel) version of Packing Materials Stock Report as on April 30, 2015 but till now no progress or report found! How long it should take? Let the Management know your problem if you have. We want soft reports every month within 3rd working day of the following month. If PLANNING provides reports after 15th, how FINANCE will close Accounting & report to the Management by 18th? Please answer positively about timeliness.

Integrated Test will be completed soon

Please read the message from SCM (Supply Chain Management) Consultant below and join the discussion session mentioned in the tabular format. Looking forward in seeing you in the session. Due to unavoidable circumstances the following meeting has been postponed till further notice. Revised schedule will be emailed to you at the earliest.

We just came to know that Costing Head is not well today. So please reschedule this meeting at the earliest and let us know.

KPMG has requested that you to please review all the responses that he has given for the COSTING issues raised by Costing. If you have any observations, please let him know.

Since you are sole member of the costing team, please review the manual sent by KPMG Consultant and revert back to us with any observations/ suggestions at the earliest.

I have seen the manual lightly since the manual, I hope, will be updated once again when Integrated Test will be completed or Pre/Post GoLive. However, I have given some recommendations for Training Manual in RED, please see and advise.

I have some concerns in Manual, so I drop in the mail to Costing for clarification. Attaching the mail for your reference.

Post Implementation Doubts on ERP Systems

Management Accounting is a huge thing if you really consider and nothing if you disregard its essence.

Nowadays, I regularly respond to various important queries of top management, by means of digging information from a hard rock. Cost related, Budget related, variance related, profitability related, volume related, margin related, inventory related why, what, who, where, when, how are my daily life. Today I can do my job even though in snail speed, will I be a sprinter tomorrow!

For example, if legacy system is off, how I will answer to these questions in ERP Environment! I can not answer now..

Why cost per unit of a Product has increased or decreased? --> How this analysis could be done in ERP?
How much is Depreciation per unit of product? ---> How to analyze?
Why a batch cost increased or decreased compared to another?-->Cause Analysis
What are the batches lost/rejected during the period?-->Batch No & Cause

Navigational Factors in New ERP Systems

We updated our COA (Chart of Accounts) along with CFO (Chief Financial Officer) Sir. Please find the remarks and Notes on Existing Chart of Accounts. I think It can help you, apart from this attaching another two sheets where PB-03 and B8 -SDA (Sales, Distribution and Administration)) accounts are separated and mentioned under which broad head what sub head will come.

I described you separately we prepared SDA (Sales, Distribution and Administration) expenses analysis with Sales and expenses budget and PB-03 only with expenses budget.

If you can recall, me also discussed we need separate total expenses(head wise) of SDA (Depot Expenses, Field Force Expenses, Head office Expenses) PB-3(Plant wise expenses). So that you are requested to keep that much scope in COA (Chart of Accounts).

You are also requested to present how we will able to do the same with new COA (Chart of Accounts).

Based on COA we are doing the following things in high level-> Daily Transactions-> Monthly Financial-> Annual Report-> Other various kinds of analysis.

As discussed, we are still waiting for you to validate the inventory organization details. Kindly validate the attached file, incorporate address for toll organizations and send the revised file at the earliest.

Is hire-purchase agreement different from Sale?

Yes! Obviously! Although hire purchase resembles sale of goods it is different in many ways. Under hire purchase agreement the goods are delivered to the hire purchaser for his use at the time of the agreement but the owner of the goods agrees to transfer the property in the goods to the hire purchaser only when the hirer pays a certain fixed number of installments of price. Thus, the essence of hire-purchase agreement is that there is no agreement to buy, but there is only a bailment of the goods coupled with an option to purchase them, which may or may not be exercised.

Tow examples of a sale and a hire-purchase agreement

[B shall have to pay for the car already delivered a reasonable price. A cannot ask for its return. As regards the second car, B cannot insist on its delivery to him since the contract has become void (Sec. 10)].

a) A dealer in radios gives a ‘Murali’ radio to a customer on the terms that Rs. 1000 should be paid by him immediately and Rs 2000 more in two monthly equal installments. It was further agreed that if the radio is found defective the customer may return it within a week but not later. The customer makes default in paying the last installment. Can the radio dealer take back the radio on his default? [ Hint. No. the radio dealer cannot take back the radio on default by the customer because it is a contract of sale and not of hire purchase]

b) A sold 1000 quintals of groundnut oil to B. Before it could be delivered to B, the Government of India requisitioned the whole quantity lying with A in public interest. B wants to sue A for breach of contract. Advise B.

Doctrine of the ultra-vires

In case of the companies other than trading corporations whose objects are not confined to one state, the states to whose territories the objects of the company extend must be specified.

Doctrine of the ultra-vires Any transaction which is outside the scope of the powers specified in the objects clause of the MA and are not reasonable incidentally or necessary to the attainment of objects is ultra-vires the company and therefore void. No rights and liabilities on the part of the company arise out of such transactions and it is a nullity even if every member agrees to it.

Consequences of an Ultra vires transaction :-1. The company cannot sue any person for enforcement of any of its rights.

2. No person can sue the company for enforcement of its rights.

3. The directors of the company may be held personally liable to outsiders for an ultra vires.

Note the following case

Ashbury Rly. Carriage & Iron Co. Ltd. V. Riche. (1875) l. R. 7 H.L 653. A company was incorporated with the following objects.

(a) To make, sell, or lend on hire, railway carriages and wagons.

(b) To carry on the business of mechanical engineers and general contractors.

(c) To purchase, lease, work, and sell mines, minerals, land and buildings.

What should you consider before buying a Digita Camera?

Compact products be inflicted with two missions to accomplish: Design and function. These policy are compact a sufficient amount to fit into a receptacle or small purse, yet powerful a sufficient amount to take high ranking quality photos. These compact digital cameras are moderately priced and by far the the largest part in style image capturing policy on the marketplace.

Design
A compact digital camera wouldn't be considered silky and slim if it was the size and burden of a brick. These products are in style for the reason that they are compact; therefore, the lighter and more powerful the device, the better it is.

Image Quality
There are numerous facial appearance found on image capturing policy with the aim of enhance its image quality. Some of these include digital zoom and a high ranking focus range. The motion is lone thing with the aim of is life-threatening designed for the image quality of the device. The motion in these policy is measured in megapixels. The more megapixels these products be inflicted with, the clearer the urban photographs. Another noteworthy include found on these policy to enhance image quality is the optical zoom. The optical zoom facility the same as zoom on a standard 35mm camera. The top the optical zoom the farther away from the object you can be and still contract a patent picture. Don't contract this bemused with digital zoom.

Features
Certain facial appearance can be the deciding thing of whether or not you firm footing the camera. All of the digital cameras we reviewed had the the largest part valuable facial appearance: An image stabilizer, red eye reduction, incessant shooting options, a self timer and separate color sound effects. Many cameras be inflicted with more unconventional facial appearance with the aim of accede to you edit and organize your photos on your camera. Some our favorite facial appearance include be in front of recognition, pet detection, straightforward mess uploading and GPS Geotagging.

Olympus Stylus XZ-2
Canon Powershot G15
Nikon Coolpix P330
Fujifilm X100s
Sony Cyber-shot RX100 II
Fujifilm X20
Ricoh GR
Nikon Coolpix P7700
Canon Powershot S100
Panasonic Lumix LX7

Battery Life/Memory
We all hate changing batteries in electronic policy. So, needless to say, these compact products with longer battery life are better, and will save money in the long run. Also, built-in reminiscence is rarely planning of as valuable until the time you need it. Built-in reminiscence is your policy back up propose if your reminiscence tag or stick is rotund, lost or damaged.

If you require high-quality photos of folks measures with the aim of are noteworthy to you, a combination of these facial appearance will provide the preeminent experience using a compact digital camera.

Management Representations in auditing

The auditor should obtain written representations from management that:

(a) it acknowledges its responsibility for the implementation and operation of accounting and internal control systems that are designed to prevent and detect fraud and error;
(b) it believes the effects of those uncorrected financial statement misstatements aggregated by the auditor during the audit are immaterial, both individually and in the aggregate, to the financial statements taken as a whole. A summary of such items should be included in or attached to the written representation;
(c) it has disclosed to the auditor all significant facts relating to any frauds or suspected frauds known to management that may have affected the entity; and

(d) it has disclosed to the auditor the results of its assessment of the risk that the financial
statements may be materially misstated as a result of fraud.

“Representations by Management” provides guidance on obtaining appropriate representations from management in the audit. In addition to acknowledging its responsibility for the financial statements, it is important that management acknowledges its responsibility for the accounting and internal control systems designed to prevent and detect fraud and error.

Because management is responsible for adjusting the financial statements to correct material misstatements, it is important that the auditor obtains written representation from management that any uncorrected misstatements resulting from either fraud or error are, in management’s opinion, immaterial, both individually and in the aggregate. Such representations are not a substitute for obtaining sufficient appropriate audit evidence. In some circumstances, management may not believe that certain of the uncorrected financial statement misstatements aggregated by the auditor during the audit are misstatements.

What is required in audit documetation?

Where a significant fraud has occurred or the fraud is committed by those charged with governance, the auditor should consider the necessity for a disclosure of the fraud in the financial statements. If adequate disclosure is not made the auditor should consider the necessity for a suitable disclosure in his report.

Documentation

The auditor should document fraud risk factors identified as being present during the auditor’s assessment process and document the auditor’s response to any such factors. If during the performance of the audit, fraud risk factors are identified that cause the auditor to believe that additional audit procedures are necessary, the auditor should document the presence of such risk factors and the auditor’s response to them.

The auditor must document matters which are important in providing evidence to support the audit opinion, and the working papers must include the auditor’s reasoning on all significant matters which require the auditor’s judgment, together with the auditor’s conclusion thereon. Because of the importance of fraud risk factors in the assessment of the inherent or control risk of material misstatement, the auditor documents fraud risk factors identified and the response considered appropriate by the auditor.

Professional skepticism is a common virtue in Auditors

The auditor plans and performs an audit with an attitude of professional skepticism. Such an attitude is necessary for the auditor to identify and properly evaluate, for example:

♦ Matters that increase the risk of a material misstatement in the financial statements resulting from fraud or error (for instance, management’s characteristics and influence over the control environment, industry conditions, and operating characteristics and financial stability).

♦ Circumstances that make the auditor suspect that the financial statements are materially misstated.

♦ Evidence obtained (including the auditor’s knowledge from previous audits) that brings into question the reliability of management representations.

However, unless the audit reveals evidence to the contrary, the auditor is entitled to accept records and documents as genuine. Accordingly, an audit performed in accordance with auditing standards generally accepted in India rarely contemplate authentication of documentation, nor are auditors trained as, or expected to be, experts in such authentication.

Factors should cover in Audit Conclusions and Reporting

The auditor should review and assess the conclusions drawn from the audit evidence obtained and from his knowledge of business of the entity as the basis for the expression of his opinion on the financial information. This review and assessment involves forming an overall conclusion as to whether:

(a) the financial information has been prepared using acceptable accounting policies, which have been consistently applied;
(b) the financial information complies with relevant regulations and statutory requirements;

(c) there is adequate disclosure of all material matters relevant to the proper presentation of the financial information, subject to statutory requirements, where applicable.

The audit report should contain a clear written expression of opinion on the financial information and if the form or content of the report is laid down in or prescribed under any agreement or statute or regulation, the audit report should comply with such requirements. An unqualified opinion indicates the auditor’s satisfaction in all material respects with the matters dealt with in paragraph 21 or as may be laid down or prescribed under the relevant agreement or statute or regulation, as the case may be.

When a qualified opinion, adverse opinion or a disclaimer of opinion is to be given or reservation of opinion on any matter is to be made, the audit report should state the reasons therefor.

Importance of audit working papers?

Importance of Working Papers:

(i) It provides guidance to the audit staff with regard to the manner of checking the schedules.

(ii) The auditor is able to fix responsibility on the staff member who signs each schedule checked by him.

(iii) It acts as an evidence in the court of law when a charge of negligence is brought against the auditor.

(iv) It acts as the process of planning for the auditor so that he can estimate the time that may be required for checking the schedules.

The auditor should adopt reasonable procedures for custody and confidentiality of his working papers and should retain them for a period of time sufficient to meet the needs of his practice and satisfy any pertinent legal or professional requirements of record retention.

Auditors’ Rights Where Clients And Other Auditors Seek Access To Their Audit Working Papers

1. Auditing and Assurance Standard SA 200, "Basic Principles Governing an Audit", states in para 6: "The auditor should respect the confidentiality of information acquired in the course of his work and should not disclose any such information to a third party without specific authority or unless there is a legal or professional duty to disclose". Auditing and Assurance Standard SA 230, states: "Working papers are the property of the auditor. The auditor may, at his discretion, make portions of or extracts from his working papers available to his client. SA 230 further requires, inter alia, that the "auditor should adopt reasonable procedures for custody and confidentiality of his working papers."

2. A Chartered Accountant in practice shall be deemed to be guilty of professional misconduct, if he discloses information acquired in the course of his professional engagement to any person other than his client, without the consent of his client or otherwise than as required by any law for the time being in force."

3. Requests are sometime received by the members of the Institute, who have/had been performing the duties as the auditors of an enterprise, to provide access to their audit working papers. The requests may be made by the clients or other auditors of the enterprise or its related enterprise such as a parent enterprise.

4. An auditor is not required to provide the client or the other auditors of the same enterprise or its related enterprise such as a parent or a subsidiary, access to his audit working papers. The main auditors of an enterprise do not have right of access to the audit working papers of the branch auditors. In the case of a company, the statutory auditor has to consider the report of the branch auditor and has a right to seek clarifications and/or to visit the branch if he deems it necessary to do so for the performance of the duties as auditor. An auditor can rely on the work of another auditor, without having any right of access to the audit working papers of the other auditor. For this purpose, the term ’auditor’ includes 'internal auditor'.

5. The client does not have a right to access the working papers of the auditor. However, the auditor may, at his discretion, in cases considered appropriate by him, make portions of or extracts from his working papers available to the clients.

Precautions taken to avoid disadvantages of a continuous audit?

The disadvantages of a continuous audit can be avoided if the following precautions are taken:

During the course of each visit, work should be completed upto a definite stage so as to avoid loose ends.

At the end of each visit, important balances should be noted down and the same should be compared at the time of the next visit.

The visits should be at irregular intervals of time so that the client’s staff may not in advance know the exact date when the audit would be resumed and thus may be able to prepare themselves in advance for the same.

The nominal accounts should be checked only at the time of final closing.

The client’s staff should be instructed not to alter or correct audited figures. The auditor should also device a special form of ticks for being placed against figures which have been altered and neither its purpose nor significance should be disclosed to the client’s staff.

Thus, it is clear from the above that final or completed audit approach is advisable in case size of the entity is very small. On the other hand, continuous audit may be followed only in case size of the entity is very large and system of internal control is weak since the great disadvantage of continuous audit is that the cost would be very high and continuous presence of audit staff may impair auditor’s independence. The interim audit conducted on quarterly or half-yearly basis is the most practicable solution.

What are current and Permanent Audit files?

In the case of recurring audits, some working paper files may be classified as permanent audit files which are updated currently with information of continuing importance to succeeding audit, as distinct from current audit files which contain information relating primarily to the audit of a single period.

A permanent audit file normally includes :

Information concerning the legal and organizational structure of the entity. In the case of a company, this includes the Memorandum and Articles of Association. In the case of a statutory corporation, this includes the Act and Regulations under which the corporation functions.
Extracts or copies of important legal documents, agreements and minutes relevant to the audit.
A record of the study and the evaluation of the internal controls related to the accounting system. This might be in the form of narrative descriptions,questionnaires or flow charts, or some combination thereof.
Copies of audited financial statements for previous years.
Analysis of significant ratios and trends.
Copies of management letters issued by the auditor, if any. Record of communication with the retiring auditor, if any, before acceptance of the appointment as auditor.
Notes regarding significant accounting policies.
Significant audit observations of earlier years.

The current file normally includes :

Correspondence relating to acceptance of annual reappointment.
Extracts of important matters in the minutes of Board Meetings and General Meetings as relevant to audit.
Evidence of the planning process of the audit and audit programme.
Analysis of transactions and balances.
A record of the nature, timing and extent of auditing procedures performed, and the results of such procedures.
Evidence that the work performed by assistants was supervised and reviewed.
Copies of communication with other auditors, experts and other third parties.
Letters of representation or confirmation received from the client.
Conclusions reached by the auditor concerning significant aspects of the audit, including the manner in which exceptions and unusual matters, if any, disclosed by the auditor’s procedures were resolved or treated.
Copies of the financial information being reported on and the related audit reports.

What should be the Contents of Working Paper?

Working papers should record the audit plan, nature, timing and extent of auditing procedures performed, and the conclusions drawn from the evidence obtained. The form and content of working papers are affected by matters such as :

Nature of the engagement.
Form of the auditor’s report.
Nature and complexity of the client’s business.
Nature and condition of the client’s records and degree of reliance on internal controls.
Need in particular circumstances for direction, supervision and review of work performed by assistants.

Working papers should be designed and properly organized to meet the circumstances of each audit and the auditor’s needs in respect thereof. The standardization of working papers (for example, checklists, specimen letters, standard organization of working papers) improves the efficiency with which they are prepared and reviewed. It also facilitates the delegation of work while providing a means to control its quality. Working papers should be sufficiently complete and detailed for an auditor to obtain an overall understanding of the audit. The extent of the documentation is a matter of professional judgment since it is neither necessary nor practical that every observation, consideration or conclusion is documented by the auditor in his working papers.

All significant matters which require the exercise of judgment, together with the auditor’s conclusion thereon, should be included in the working papers. To improve audit efficiency, the auditor normally obtains and utilizes schedules, analyses and other working papers prepared by the client. In such circumstances, the auditor should satisfy himself that these working papers have been properly prepared. Examples of such working papers are detailed analysis of important revenue accounts, receivables etc.