ACCA F8. Provided by Academy of Professional Accounting (APA) Liability, Capital and Directors Emoluments ACCA Lecturer: Tom Liu

Transcription

1 Professional Accounting Education Provided by Academy of Professional Accounting (APA) ACCA F8 Liability, Capital and Directors Emoluments ACCA Lecturer: Tom Liu ACCAspace 中国 ACCA 特许公认会计师教育平台 Copyright ACCAspace.com

2 Objective of this lesson 1 Introduction 2 Procedures for trade payables, accruals and expenses 3 Non-current liabilities 4 Provisions and contingencies 5 Capital and other issues 6 Directors' emoluments 2

3 Introduction Trade payables and accruals Long-term liabilities and provisions Share capital, reserves and directors emoluments( 董事薪酬 ) 3

4 Procedures for trade payables, accruals and expenses Completeness Compare the current year balances for trade accounts payables and accruals with the previous year. Perform a confirmation of accounts payables for a sample Compare the payables turnover and payables days to the previous year and industry data. Existence Vouch selected amounts from the trade accounts payables listing and accruals listing to supporting documentation, such as purchase orders and suppliers' invoices. Obtain selected suppliers' statements and reconcile these to the relevant suppliers' accounts. Perform a confirmation of accounts payables for a sample. Perform analytical procedures comparing current year balances with the previous year to confirm reasonableness 4

5 Procedures for trade payables, accruals and expenses Rights and obligations Accuracy, valuation and allocation Vouch a sample of balances to supporting documentation, such as purchase orders and suppliers' invoices, to obtain audit evidence regarding rights and obligations. Trace selected samples from the trade accounts payables listing and accruals listing to the supporting documentation Obtain selected suppliers' statements and reconcile these to the relevant suppliers' accounts. Compare the current year balances for trade accounts payables and accruals with the previous year.(ap) Compare the payables turnover and payables days with the previous year and industry data.(ap) Recalculate the mathematical accuracy of a sample of suppliers' invoices to confirm the amounts are correct 5

6 Procedures for trade payables, accruals and expenses Cut-off For a sample of invoices, compare the dates with the dates they were recorded in the ledger for application of correct cut-off. Perform analytical procedures on purchase returns, comparing the purchase returns as a percentage of sales or cost of sales to the previous year. Classification and presentation Review the trade accounts payables listing to identify any large debits (which should be reclassified as receivables or deposits) or long-term liabilities which should be disclosed separately. Read the disclosure notes relevant to liabilities in the draft financial statements and review for understandability. Read the disclosure notes to ensure the information is accurate and properly presented at the appropriate amounts. 6

7 Non-current liabilities Non-current liabilities are usually authorised by the board and should be well documented. Assertion: Completeness (Very important) Accuracy Classification Procedures: Examine signed board minutes relating to new borrowings/repayments. Obtain direct confirmation from lenders of the amounts outstanding, accrued interest and what security they hold. Verify that interest charged for the period is in accordance with statements and supporting agreements, and consistent with known interest rates. 7

8 Provisions and contingencies Obtaining audit evidence of contingencies: Make appropriate enquiries of management and others including inhouse legal advisers. Review minutes of meetings of those charged with governance and correspondence between the entity and its external legal advisers. Review legal expense accounts. A request that the entity's external legal advisers confirm the reasonableness of management's assessments and provide the auditor with further information if they consider the list to be incomplete or incorrect 8

9 Provisions and contingencies The audit of provisions Recalculate all provisions made. Obtain a detailed analysis of all provisions showing opening balances, movements and closing balances. Obtain details of all provisions which have been included in the accounts and all contingencies that have been disclosed. 9

10 Capital and other issues The main concern with share capital and reserves is that the company has complied with the law. 10

11 Directors' emoluments The auditor will need to make sure the disclosure of directors' emoluments is complete, accurate and compliant with both applicable accounting standards and local legislation. 11

12 Syllabus Status D4 The audit of specific items (c) Payables and accruals: (i) Supplier statement reconciliations and direct confirmation of accounts payable (ii) Obtain evidence in relation to payables and accruals, and (iii) Purchases and other expenses[2] (f) Non-current liabilities, provisions and contingencies: (i) Evidence in relation to non-current liabilities (ii) Provisions and contingencies[2] (g) Share capital, reserves and directors' emoluments: (i) Evidence in relation to share capital, reserves and directors' Emoluments[2] 12

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