Why impairment of goodwill is not reversed?
First of all we must be clear that goodwill is an intangible asset that entities can recognize in their financial statements but only such goodwill that is acquired in business combination. Internal goodwill or in-house goodwill is not recognized as entity’s assets in books of accounts. One more thing to understand is that goodwill is […]
What is meant by Economic benefits and how they flow to the entity?
It is easy to understand that entities around the world hold different sets of machinery, plant, equipment, building, land and other kinds of assets through which it offers products or services to its customers and in return earn income and generate cash. Products are made through different machines and the value these machines and equipment add […]
What is meant by ‘lowering detection risk’ in auditing?
A practitioner (or simply auditor) performing audit engagement is required to reduce audit risk to such level that is suitable to provide reasonable assurance to the intended users. By audit risk we mean that probability that auditor express an inappropriate audit opinion when the financial statements are materially misstated i.e. auditor stated that financial statements […]
What is meant by ‘net of’ in accounting or tax and other business related subjects?
The expression ‘net of’ represents the exclusion of something from a particular sum. For example net of tax means the resultant amount which is exclusive of tax or in other words the amount we get after deducting tax is net of tax amount. We can see its uses in wide variety of ways in accounting […]
Is audit an attestation engagement or direct reporting engagement?
Audit engagement is an attest or attestation engagement rather than direct reporting engagement. As the purpose of audit engagement is to enhance the degree of users of financial statements which is achieved by the expression of opinion by the auditor. This opinion given by the auditor is merely about the fairness of the financial statements […]
What is meant by Assertions in audit or auditing?
Assertions or management assertions in audit or auditing simply means what management claims. For example, if a management states that internal controls are effective then it is a claim or assertion made by management. Similarly, it is primarily the responsibility of the management of the entity to prepare financial statements in which all the assets, […]
What is assurance engagement?
Assurance engagement is an engagement performed by a practitioner to enable himself to express an opinion about the measurement of subject matter against a criteria. Practitioner’s expression of opinion raise the confidence of the users over the measurement as to whether measurement of subject matter is a fair statement keeping the criteria applicable under consideration. Replacing the formal […]
What is an Assurance engagement in auditing?
Assurance engagement is an engagement performed by a practitioner to enable himself to express an opinion about the measurement of subject matter against a criteria. Practitioner’s expression of opinion raise the confidence of the users over the measurement of subject matter subject to the criteria applicable under consideration. To summarize the above formal definition, read through the […]
What is the difference between Attestation engagement and Direct reporting engagement in auditing?
Before we discuss the difference between attestation engagement and direct reporting engagement, lets understand what is assurance engagement at first place. Assurance engagement is simply an engagement conducted by a practitioner at the end of which he expresses his opinion on the measurement of subject matter against a criteria. This opinion will ultimately enhance the degree of […]
Is depreciation expense a fixed cost or a variable cost?
Let’s revisit the terms Fixed cost and Variable cost and then we will discuss where depreciation cost/expense really fits. Fixed costs are such costs that do not change with the change in activity level (e.g. units produced) with in the relevant range. Where relevant range can be defined in terms of time or activity level. […]
