Balance Sheet Audit

Statutory & Standard Requirements

Account should be kept (S.166A, Co. Act
1965)
Preparation of the financial statement by
management/client should comply with
MFRS. (S.167, Co. Act 1965
MFRS 101: It sets out overall
requirements for the presentation of
financial statements, guidelines for their
structure and minimum requirements for
their content (Para.1, MFRS 101)

Statutory & Standard Requirements

(contd)
ISA 500: the auditor to obtain sufficient
appropriate audit evidence to be able to draw
reasonable conclusions on which to base the
auditors opinion
ISA 330.4: Substantive procedure An audit
procedure designed to detect material
misstatements in the financial report assertion.
ISA 330.18: Irrespective of the assessed risks of
material misstatement, the auditor shall design and
perform substantive procedures for each material
class of transactions, account balance, and
disclosure.

Verification of intangibles, investments equities & reserves,

Intangible assets & Goodwill

Intangible assets are identifiable assets that
provide economic benefit for longer than a year,
but lack physical substance (IFRS), for example:
1. Marketing trademark, brand name, and Internet domain
names.
2. Customer customer lists, order backlogs, and customer
relationships.
3. Artistic items protected by copyright.
4. Contract licenses, franchises, and broadcast rights.
5. Technology patented and unpatented technology.

Goodwill represents the difference between the

acquisition price for a company and the fair value
of the identifiable tangible and intangible assets
and liabilities (IFRS).

The inherent risk associated with

intangible assets and goodwill raises
serious risk considerations. The
accounting rules are complex and the
transactions are difficult to audit.
Accounting
standards require different asset
impairment tests for different classes of
intangible assets.
With the judgment and complexity
associated with valuation and estimation
of intangible assets and goodwill, the
auditor would likely assess the inherent
risk as high.

In assessing control risk, the auditor considers factors

such as:
1. The expertise and experience of those determining
the fair value of the assets.
2. Controls over the process used to determine fair
value measurements, including controls over data
and segregation of duties between those committing
the client to the purchase and those undertaking the
valuation.
3. The extent to which the entity engages or employs
valuation experts.
4. The significant management assumptions used in
determining fair value.
5. The integrity of change controls and security
procedures for valuation models and relevant
information systems, including approval processes

Key procedure:
Physical examination
Confirmation
Inspection of legal documents
Recomputation, vouching, tracing
Specialised valuation procedures
consider use of experts.

Investments - Assertions, objectives

and substantive procedures

Non-current liabilities and owners equity: key

procedures

Key assertion:
completeness
Key procedures:
external confirmation
reading minutes of meetings
substantive analytical procedures
examination of contracts and agreements
inspection of share registers.
10-9

THANK YOU