By hardi on Sep 24, 2009 in Revenue Recognition | 0 Comments
Revenue from the sale of goods should be recognized if all of the five conditions mentioned below are met.
- The reporting entity has transferred significant risks and rewards of ownership of the goods to the buyer;
- The entity does not retain either continuing managerial involvement (akin to that usually associated with ownership) or effective control over the goods sold;
- The quantum of revenue to be recognized can be measured reliably;
- The probability that economic benefits related to the transaction will flow to the entity exists; and
- The costs incurred or to be incurred in respect of the transaction can be measured reliably.
The determination of the point in time when a reporting entity is considered to have transferred the significant risks and rewards of ownership in goods to the buyer is critical to the recognition of revenue from the sale of goods.
Read further in here >>
By hardi on Jul 16, 2009 in Revenue Recognition | 0 Comments
“Revenue is recognized when it is probable that future economic benefits will flow to the entity and these benefits can be measured reliably” (IAS 18 Revenue).
Revenue can take various forms, such as sales of goods, provision of services, royalty fees, franchise fees, management fees, dividends, interest, subscriptions, and so on.
The principle issue in the recognition of revenue is its timing – at what point is it probable that future economic benefit will flow to the entity and can the benefit be measured reliably.
Read more in here >>
By hardi on Nov 10, 2008 in Audit Risk, Auditing | 0 Comments
ISA 315 Par. 100 states that the auditor should identify and assess the risks of material misstatement at the financial statement level, and at the assertion level for classes of transactions, account balances and disclosures.
Risk and materiality are closely related. Materiality must be established before risk has any meaning.
Desired audit risk is the subjectively determined risk that the auditor is willing to take that the financial statements are not fairly stated after the audit is completed and an unqualified opinion has been reached. The lower the desired audit risk, the more sure the auditor wants to be that the financial statements are not materially misstated.
In relation with the audit risk, there are three related risks the auditor must consider : inherent risk, control risk and detection risk. These are related to audit risk in a format commonly referred to as the audit risk model.
This model is useful in helping auditors decide the amount of evidence needed in a given situation and the relationships among the basic types of audit tests.
Such audit risk model is : AR = IR X CR X DR, where AR = Audit Risk, IR = Inherent Risk, CR = Control Risk, DR = Detection Risk
Read more in here : Audit Risk model
