Financial Statements of Organization
17 Pages3672 Words32 Views
Added on 2021-05-27
Financial Statements of Organization
Added on 2021-05-27
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ALDERAN RESOURCES PVT LTD
INTRODUCTION OF THE REPORTAuditing is an independent examination of financial information of an entity whether profit making or not and irrespective of its size that is small, medium or big or its legal form whether it is a company(whether listed or unlisted), partnership or any other body corporate and when such examination is conducted with a view to an express an opinion thereon on the financial statements of the company. This report will describe how the audit program in practicality is made considering all the important criteria for audit report and taking on the bifurcated responsibility of management in construction of accounts and auditor’s responsibility to express a qualified or an unqualified opinion. It will also help in framing an audit programme which will describe the steps in audit of material account balanced and selected assertions and providing sufficient and appropriate audit evidence which shall further in turn lead to expressing an opinion thereon.TEST OF CONTROLS,SUBSTANTIVE TESTS OF TRANSACTIONS ANDSUBSTANTIVE TEST OF BALANCESTest of controlsTest of controls are that compliance procedures to verify the designing, operation, effectiveness and continuity of internal control system in the company. Auditor performs the audit procedure with respect to following assertions:1.Existence : Whether there are actually internal controls existing in the company or not.2.Operating effectiveness: It is done to check if the internal controls exist in the company whether they are operating effectively or not.3.Consistency: It is also to be checked whether or not the existing internal controls are operated through out the period.Substantive procedureSubstantive procedure are performed to check completeness, accuracy and validity of transaction and balances.2
Differentiating Substantive test of transactions and substantive test of balanceSubstantive test of transactionsSubstantive test of balancesThese tests are done for the measurement purpose that is whether the transactions are recorded in proper period and at proper amount.Whether the item is disclosed and classified as per relevant accounting policies and relevant statutory laws and requirement. Test of balances are done to check that there is no assets and liabilities left to be recorded. It also verifies that event actually tookplace during the relevant period.Identifying and assessing the auditors need to perform substantive audit procedureThe auditor shall identify and assess the risk of material misstatement at financial level and assertion level for class of transactions.The auditor shall identify, evaluate and assess identified risk and perform substantive audit procedure in following cases:a)If there is a risk of fraud.b)Considering whether the transaction is of complex nature.c)Whether there is transaction which gives rise to related party transaction.d)The materiality of transactions or the subject matter.e)When there is risk of significant unusual transaction.Cases in which the substantive procedures only are not sufficientThe risks which are inaccurate and lead to high risk to significant account balances and where there is high automation involved and no or minimal manual intervention. In such cases substantive procedure alone arenot sufficient.3
Understanding relation of assertions with account balancesRelationship of assertion with respect to account balances:Valuation: In this it shows whether the asset or liability is recorded at an appropriate value.Existence: Whether the asset or liability exists at a given date.Rights and duties of auditor: Whether the assets is a right of entity and liability is a duty of the entity.FRAMING AN AUDIT PROGRAMMEObjective of auditPRIMARY OBJECTIVE:Audit is conducted to express an opinion on financial statement that is the primaryobjective is reporting. Reporting on whether the financial statement providestrue and fair view.SECONDARY OBJECTIVE:The secondary objective is to detect the misstatement in financial statement and not to frame such an opinion if the auditor is unable to confirm or refute the risk of fraud.NATURE OF BUSINESS ENTITY:Business operations: Alderan resources ltd is company that is involved in natural resources. The company is popularly known in natural resources industry for providing metal exploration and production services.Investments and Investments activities: Alderan resources ltd is investing and expanding aggressively and decided to begin drilling at Accrington and Perseverance which is company’s current high drilling program.Financing and financing activities: Recently the company has raised $3 million through placement of 5 million shares in which maximum are solid and reliable shareholders for the investment purpose mentioned in above point.Financial reporting practices: The Company follow the practice of generating quarterly cash flow statement which shows cash generated from operating activity, investing 4
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