What is the difference between Hot and Cold reviews in auditing?
According to ISQC 1 it is the objective of the firm to establish and maintain a system of quality control to provide it with reasonable assurance that: The firm and its personnel comply with professional standards and applicable legal and regulatory requirements; and Reports issued by the firm or engagement partners are appropriate in the […]
What is Negative goodwill and its accounting treatment?
Goodwill has been defined under IFRS 3 as following: An asset representing the future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognised. On analysing the definition we can understand that goodwill is an asset but is not the asset which can individually be identified […]
How Professional judgement and Professional skepticism are different in application?
Professional Skepticism and Professional Judgment both are required to conduct the assurance engagements properly. But both are two separate requirements and are not one and the same and are different in their meaning and also in their application. But surely both complement each other in auditor’s work. Professional Skepticism The auditor is required to maintain […]
What is the difference between Material effect and Pervasive effect in auditing?
The misstatements and their effects of great importance and auditor consider these effects for their implications on financial statements and auditor’s report. The auditor considers whether uncorrected and undetected misstatements have material and pervasive effect or just material but not pervasive while drafting auditor’s report. Although auditor considers these two characteristics of misstatements collectively to […]
What is the difference between Due Care and Due Diligence in auditing?
In IESBA Code of Ethics for Professional accountants, one of the fundamental principles is the principle of Professional competence and due care. Practitioner (auditor) is required to conduct assurance engagement with due care which ultimately requires auditor to act diligently. Due care simply refers to the degree of care which is expected from a reasonable […]
What is the difference between Material Misstatement and Material Inconsistency?
Material misstatement refers to such misstatements if present in the financial statements then the financial statements may affect the economic decisions of the users of financial statements. Material misstatements relates to the information included in the financial statements. Material inconsistency such inconsistencies that arise due to conflict between the information included in other information and […]
What is Two-factor theory of motivation?
Two-factor theory of motivation was proposed by Fredrick Herzberg. This theory is also well known with Herzberg’s motivation-hygiene theory. Herzberg suggested that the factors that make employees satisfied are different from the factors that make employees dissatisfied. To some it might be illogical as many believe that if factors that cause dissatisfaction are removed then […]
Does Standard costing means costing based on cost accounting standards like financial accounting standards?
Standard costing does not mean cost accounting using uniform cost accounting standards similar to financial accounting standards. The main purpose of financial accounting standards is to have such set of financial statements for every entity that is comparable with other entity’s financial statements and also to have uniform basis of accounting for different transactions that […]
What is Normal costing?
Right at the very start of cost accounting we understand that decision making is one of the crucial and an ongoing process in every organization. Managers have to decide about many things all the time and for this they need relevant and reliable information or to be specific complete information. This is where cost accounting […]
What is the difference between Waste, Scrap, Spoil and Defect?
Waste: This is a loss connected with raw material or inputs to the production process and usually means to refer that input has been lost due to any reason either because of its nature of the material itself, nature of the process or some other conditions. Sometimes such output that does not have any sales […]