#29- Review of Legal Expenses

As an auditor, we would examine the nature of the legal expense even if it is not materil/ significant from the audit engagement point of view.

The rationale is to examine the nature of the expense incurred and to search for any outstanding litigation against the company, or the company is involving in any legal cases. As the damages for litigation could be tremendous, and needed to be disclosed to the financial statement users.

Hence, careful examination is required.

Alternatively, ' Legal Confirmation' could be sent to the client's lawyers to confirm if there is any on-going legal cases against the company.

#28 Auditing audit fees

How do we conduct the auditing process for audit fees as an auditors? What do we have to do?

Firstly, we have to obtained the agreed/ proposed audit fees for current year. And we used the formula below to assess the sufficiency for recorded audit fees:

Agreed audit fees + Reversal of Overprovision (if any) - Additional Accrual for Underprovision (if any)+ Additional audit related charges incurred during the year

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#27 Classification of Bad Debt Expense

Should the bad debt expense be net off from the gross profit? or should it be classified in other operating expense?

The answer is: bad debt expense should be classified as General & Administrative Expense in Profit & Loss.