Usually, in most countries, every company is obliged by law to prepare its annual financial statements as well as get them audited by a statutory auditor. The responsibility of a statutory or independent or external auditor, as per the International Standards of Auditing (ISA), is to obtain all relevant information from the management and those […]
Professional Judgment in Auditing – What Is It? (Usages included) Read More »
An Independent Auditor’s job is to give reasonable assurance that a company’s financial statements give a true and fair view. Reasonable assurance is a high level of assurance but not the absolute level of assurance due to the inherent limitations of an audit. To achieve a high level of assurance, the International Standards of Auditing
Professional Skepticism in Auditing – Why Is It Necessary? Read More »
Accounting estimates can best be described as the approximation of the amount to be debited or credited in the respective account, where no precise means of measurement are readily available. Accounting estimates are generally derived from specialized knowledge and judgment, which is derived from experience and training. Mostly they are used in determining the carrying
What is the Accounting Estimate? (Example and Explanation) Read More »
Financial Statement Assertions are the claims that are made by the organization’s management pertaining to the financial statements. These assertions form a consolidated basis from which external auditors are able to develop a set of audit procedures. Therefore, it can be seen that when management prepares financial statements, they make five assertions regarding each line
What Are the 7 Financial Statement Assertions? (Explanation) Read More »
At each financial year’s end, every company must get its accounts and books audited. During an audit, your auditor inspects and accumulates all your financial data regarding business transactions throughout the year and evaluates the information gathered for accuracy and genuineness. Becoming an auditor requires a great deal of knowledge regarding tax and accounting standards
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Introduction: Companies have an internal audit to evaluate their internal controls, like corporate governance and accounting processes. The main purpose of internal audit is to provide the company with independent assurance that its risk management, corporate governance, and internal control processes are operating effectively. The internal audit ensures that rules, regulations, and laws are being
What Are the Advantages and Limitations of Internal Audit? Read More »
Introduction: The cost of goods sold also referred to as the cost of sales is the cost you incur to make your products or services. Generally, this cost includes direct material, direct labor, and production overheads. In a service business, this cost will include the pay of labor, taxes paid, and any benefit given to
How to Increase or Decrease the Cost of Goods Sold? Read More »
Introduction The identification and allocation of costs determine the profitability of the product or the organization. The costs are classified into direct and indirect costs based on the cost’s traceability to the product. It is called direct cost when the expenditure can be identified and feasibly allocated to a particular product. Contrary to this, those
Direct cost Vs. Indirect Cost – What are the Key Difference? Read More »
Definition: Conversion costs are the costs that are incurred by manufacturing companies when converting raw materials into finished goods. It is the direct labor plus any manufacturing overheads needed to convert raw materials into a finished product. In other words, conversion costs are associated with converting direct materials into an actual product ready to be
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Definition: A prime cost refers to an entity’s expense directly related to the materials and labor used in production. Prime costs are those costs that are directly incurred to create a product or a service and are particularly useful in determining the contribution margin of a product or a service and calculating the minimum price
Prime Costs: Definition, Formula, Explanation, and Example Read More »