audit risk video

Question 1

cash settled share based transactions

Answer 1

client should re measure fair value of liability at the end of each reporting period
-any changes in FV go to PnL

Question 2

Audit risk

Answer 2

ROMM +
detection risk

Question 3

answering technique for risks of material misstatements

Answer 3

-comment on materiality where possible (amount or nature)

-relevant accounting treatment that should be followed by client

-identify risks in given scenario (any incorrect accounting done or potential)

-impact on FS (understatement/overstatement/ inadequate disclosure)

Question 4

3 technical marks for materiality

Answer 4

-calculate lower range of benchmark given in requirement
-calculate upper range
-a decision with justification on the amount that you’ll be using

just state in risk:
XYZ is highly material to the group

Question 5

client calculated VIU taking inflows that will be received after asset is repaired

Answer 5

not correct
VIU shud be calculated in current condition

Question 6

justify why FS area is significant risk

Answer 6

significant means:
-likelihood (probability it wud occur)
-magnitude (materiality of impact) items or areas can be material by nature amount or circumstances

Question 7

WIP increased by 10% and sales increased by 4%

WIP calcuated by new director

Answer 7

-seems high compared to sales
-estimating WIP is complicated and involves judgement
-new so lack of knowldege, inconsistency