#50- Search for Unrecorded Liabilities (Post 2)

A search for unrecorded liabilites is to check for the completeness of the information disclosed by management / balances disclosed on the management account. However, the work is always the trickiest and toughest. A substantial amount of informations are required to fulfill the audit's satisfactory level.

How can we ensure completeness of contingent liabilities?

- Inquire with management on the status of the on-going project, analyzed the circumstances and identify potential commitments and contingencies which might have been made by managment, but not disclosed.

- Sending bank confirmation to obtain external evidence on potential bills payable, letter of credit, etc.

- Examine all the agreements of the Company to identify potential liabilities, such as: corporate guarantee given to bank for guarantee over subsidiaries' loan.

- Examine minutes & resolutions to identify on-going activities which might require commitments and contingencies

#49- Impairment on Property

We received the following query from our reader:

".. other than an independent valuation, what other alternative method can we use to test for impairment on property.."

Before we proceed to answer the following question, let's assume that the property above relates to building, land or any other commercial related building employed by the Company in the course of doing ordinary busines..

To answer your question, if the property is involved in the ordinary course of business ( e.g. shophouse where a business do its trading), then the alternative method includes:
1) Discounted Cash Flow Analysis
2) Profitability forecast for the next 5 years
3) Obtained market price of the similar property in the area nearby

To elaborate on point 1 and 2 above, if the business is able to generate sufficient cash flow and be in profit position. The auditor can conclude that there is no indcation of impairment on the property. As the asset employed is sufficient to sustain the business operations of the Company, and hence no impairment.

Besides that, the auditor could obtained the last transation price of the similar property in nearby area to compare the market price to book value of the property, in order to assess the existence of indication of impairment.

Announcement: Launching of SME Blog

Announcement:

Dear Auditing & Accounting Blog readers, we would like to, formally, announce the launching of our sister's blog:

Small and Medium Enterprises Blog @ the following URL:

http://mysme.blogspot.com

After countering numerous Small and Medium Enterprises, and meeting with all the SME' market leader, we would like to share our expertise in discussing contermporary issues facing SMEs in the global market. SMEs play a vital role in contributing the business growth of the global, and it should not be ignored. Hence, the SME blog is launched to share our expertise in SME.

Please visit the blog and leave some comment to us at: mysmeblog@gmail.com

Thanks.

Sex in Auditing & Accounting Industry

Let's make a guess on which is the majority sex group ( male / female) in auditing industry?

From an overall perspective, the majority of sex group tends to be female. This is consistent with the circumstances of more females are studying accounting degree.

However, examination of sex group at executive level ( in the auditing / accounting industry) reveals that the % of male start increasing. Probably, due to family commitments/ hectic working style, the female decided to left the industry.