What are net purchases in accounting/business?
Definition Net purchases refer to total purchase after deducting discount obtained from supplier, goods returned to the supplier, and allowances made on the purchase. This … Read more
What is audit risk (functional aspects)
Definition The audit risk is that auditors might issue an inappropriate audit report. It’s a prime business risk for audit firms that might bring reputational … Read more
Audit report modification/changes
Audit report modification is when auditors need to change/modify their audit opinion. The audit report can only be changed/modified in line with the accounting standard. … Read more
What is audit report?
The audit report is a document attached with the financial statement. In this report, external auditors state their opinion about the financial statement prepared by … Read more
What is directional testing in an audit?
Definition Directional testing is when auditors obtain sufficient and appropriate audit evidence from a specific direction. The directional testing can be either debit or credit … Read more
What is going concern assumption?
Definition Going concern assumption is used by businesses to prepare the financial statement. This assumption impacts the accounting treatment, valuation, and presentation of various account … Read more
List of audit procedures in external audit
Audit procedures in external audit play important role. Without performing these procedures, an auditor may not verify audit assertions and issue audit report. It’s advisable … Read more
Why external auditors assess internal controls?
Auditors need to understand the overall business environment and controls implemented by the audit client. This enables them to assess the overall risk of material … Read more
Why is business understanding important for the auditor?
Business understanding is important for auditors in the following way, Auditors will be able to assess the risk of material misstatement more precisely. It helps … Read more
What are audit assertions?
Definition Audit assertions are claims made by management that financial statements are accurate and do not contain any errors. Here, auditors’ work begins and they … Read more
What is Know your client – (KYC) in an audit?
Definition In an audit, know your client means an auditor needs to understand client business. The understanding needs to be obtained from different perspectives including … Read more
What are the audit procedures?
Definition Auditors perform audit procedures to obtain sufficient and appropriate audit evidence on the identified risks. Generally, auditors understand business, assess the risk of material … Read more
What is audit scoping?
Definition Audit scoping refers to the process of setting extent, nature, and timing of audit procedures to be performed. The scope of auditing is dependent … Read more
Quality Control Review (Definition, Importance, Elements, Procedure)
The term Quality control review is widely used in the world of accounting and auditing. It aims to enhance the accuracy of implemented controls in … Read more
Bookkeeper and accountant (what is the difference)
People often put off their business idea because bookkeeping and accounting scare them. We understand it can be tough and technical to do tax and … Read more
What is cut off testing in the audit?
Definition Cut off testing refers to determining if accounting entries are recorded in the correct accounting periods. The purpose of this exercise is to determine … Read more
What is target costing?
Definition Target costing is a systematic way to set product price. It considers the current market price and desired profit to set production cost. It … Read more
What is substance over form in accounting?
Substance over form principle states that transaction should be recorded based on realism (substance). If there is a conflict between realism and form (legal aspects), … Read more
What are analytical review procedures?
Definition The auditor performs analytical review procedures during audit execution. As the name suggests, it’s analytical. It means numbers are compared with other numbers by … Read more
What Is Operational Audit
An operational audit is conducted to evaluate the performance of a company’s operations. It includes both day-to-day activities and broader-scale activities. This type of audit … Read more