Meaning of materiality There is no specific definition of materiality under U.S. Generally Accepted Accounting Principles (GAAP). However, the gist per the Conceptual Framework for Financial Reporting under International Financial Reporting Standards states that information is to be considered material if it influences the decisions of stakeholders who depend on the financial information of the […]
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Meaning of retained earnings The company operates in a business environment and strives to obtain higher and higher profits each year. The net profit is obtained by deducting the expenses from the revenues. These net profits are appropriated to reserves and surplus. Such profits when transferred to reserves and surplus after paying off the dividend
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Meaning of share capital Share capital is the amount invested by a company’s shareholders for use in business operations. After the company’s creation, the shareholders bring in the contribution through cash or in-kind which is shown on the balance sheet on the liability side as an equity account. Share capital is also called shareholders’ capital,
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Meaning of Investments Investment is the deployment of capital in order to earn interest, dividend, or capital appreciation. Investments are basically either held to maturity or available for sale securities. Held to maturity securities are those that are held with intent until maturity. These are reported at cost, provided for amortization and accretion of discounts.
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What is Revenue? Revenues that the entity recognizes in the income statement during the year are the income that the entity sells the goods or services to its customers. These revenues are recognized when the control is passed from the entity to its customers. It is recognized either when the customer pays immediately or is
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Definition: Search for unrecorded liabilities is the audit testing procedure that auditors perform to verify if there are liabilities that exist at the reporting date and are not recorded in the company’s financial statements. Auditors perform such tests of the search for unrecorded liabilities to give an appropriate response to assess the risk of understatement
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Overview The Risk of material misstatement requires that the auditor must identify and assess the risk of material misstatement at the financial statement level, individual account level, and provide disclosure of performing different audit procedures. Risk of material misstatement basically includes both inherent risk and control risk. Hence, the impact of RMM for investment will
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Auditing is the examination that conducts by independent and competent auditors and it ranges from operational, financial, internal control, and so on. A financial audit is generally for the purpose of requirements from the management, directors, and shareholders of the company. The company that operates in a different jurisdiction is having a different obligation to
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Audit Definition: The word audit is derived from the Latin “Audire” which means “Hear”. The audit is the Process by which competent individuals examine accounting records to form an opinion and generate the audit report. The objective of the Non-Statutory Audit: The main objective of an audit is the assessment of financial statements prepared with
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Journaling entry testing: The need for journal entry testing arises when the auditor needs to test the nature, timing, and extent of journal entries. It is done to recognize the risk of material misstatement due to fraud while recording financial transactions. The auditor should be vigilant in its audit of transactions and look at all
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