What is LISH inventory method?
LISH is the acronym for Last-in, Still-here and is basically just another name given to First-in, First-out (FIFO) method which is a well known inventory valuation method based on particular cost flow assumption. Different authors sometime coin new terms, this might be one of them. As FIFO is the widespread term and is also used […]
What is Audit programme or Audit program?
First things first audit programme or audit program refers to one and the same thing. Audit programme is used in British English whereas Audit program is used in American english. However, audit program can also mean some auditing software but here I will be discussing this term in relation to auditing and what is its […]
What is the recognition criteria of equity?
Framework for Preparation and Presentation of Financial Statements (Framework) issued by International Accounting Standards Board (IASB) is one of the important documents. Many of the basic concepts that also form the very foundation of International Accounting Standards (IASs) have been discussed in it and provides a framework for development of accounting standards as well. Although […]
Why residual value (salvage value) is not allocated to the useful life of a depreciable asset?
Scrap value or salvage value or residual value is the value which we expect to receive by selling an asset at the end of its useful life. So basically it is the monetary value of the economic benefits that will be recovered from the asset by selling the asset and not through use of the […]
What is difference between full and reduced substantive testing?
First of all lets clear out few things which are essential for this question to be answered. Latest ISAs are based on business risk approach to conduct an audit engagement and requires the auditor to use this approach to design and apply audit procedures. The question of whether to apply full substantive procedures or detailed […]
Are prepaid expenses financial asset?
In order to confirm whether a particular asset is a financial asset or not, we will have to look at the definition of financial asset International Accounting Standard IAS 32 defines the term financial asset in para 11. Although the definition of financial asset is a bit detailed and lengthy but I will be quoting […]
What is the difference between soft capital rationing and hard capital rationing
Capital rationing is the process of regulating the capital expenditure when capital is scarce. When capital is in limited supply i.e. raising capital is not easy then company will have to pick and choose between what investment choose and what to just let go even if all the investments are favourable. This is done by […]
What is Capital rationing?
Rationing basically means a process of controlled distribution of such resource which is scarce i.e. available in limited supply. The basic reason behind controlling the distribution process is to ensure that resource is distributed fairly and no one is left deprived of such resource or at least perception of deprivation does not arise. The same […]
What is Directional testing?
Auditor gathers sufficient appropriate audit evidence to reduce audit to an acceptably low level and also the same audit evidence enables the auditor to reach reasonable conclusions which form the basis of auditor’s opinion. Now to gather sufficient appropriate audit evidence, auditor has to select the appropriate audit approach or audit methodology that promises the […]
What is the difference between Audit Procedure and Audit Methodology?
First of all lets agree on the point that auditor is required to obtain sufficient appropriate audit evidence to form reasonable conclusions and on the same conclusions auditor base his opinion. If we are clear on this part than we are half way through. The next question is how auditor is going to obtain sufficient […]