[AUD] Estimates, Related Parties, Going concern, Employee benefit plan

Estimates

1. Completeness, All estimates developed

 - LCA, new transaction

2. Valuation, estimates are reasonable

Evaluate reasonableness	Cautions
1) understand how mgt develop 2) Review & test mgt's process 3) Develop own expectation      ex) Aging schedule   4) Review subsequent events	1) Sensitive to variation 2) Inconsistence with the prior period 3) Susceptible to bias

 

3. Presentation and disclosures

   estimates follow GAAP + properly disclosed

 

* performing a retrospective review, PY

> CY estimates has problem

 

Related Parties > Disclosures

related party transaction may result in the substance of the transaction being different from its form

> may could cause the FS to fail to achieve fair presentation

 

Required disclosures

- Nature of relationship

- Description of transaction

- Dollar amount of transactions

- Amounts due to/from related parties

* Related party transaction not disclosed > Q/A

 

1. Conditions in which related-party are likely

- Lack of sufficient working capital or credit to continue the business

- Declining industry profitability

 

2. Procedures to identify related parties

3. Procedures to identify transactions

- exchanging property for similar assets in a non-monetary transaction

- review accounting records for large, nonrecurring transactions

- review confirmations of loans receivable and payable for guarantees

4. Procedures for identified related party transactions

-understand the purpose

examine supporting doc

verify the existence of the required approval

evaluate the reasonableness of amounts to be disclosed

 

Going concern

 

1. Auditor's responsibility

must evaluate, substantial doubt, next 1yr

not necessary to design audit for identify substantial doubt

 

2. Audit procedure

- analytical procedure

- review of subsequent events

- Review of compliance with terms of debt and loan agreements

- Reading minutes

- Inquiry of legal counsel on LCA

- confirmation of arrangements

 

3. Evaluate mgt's plan to mitigate substantial doubt > Disclose

Plans to dispose of assets, Plans to borrow, Plans to reduce expenditure, plans to increase ownership equity

 

4. Reporting

Substantial Doubt not exist > FS Disclose, UM+EM

Substantial Doubt exist > FS Disclose, UM+"Going concern"(following opinion paragraph)

 

5. Documentation(Plan, disclosure, reporting) > 일반적인 경우라면 추가되지 않음

- conditions let to belief substantial doubt exists

- mgt's plan, important to overcoming significant doubt

- evidence obtained to evaluate mgt's plan

- conclusion

 

Employee benefit plan

 

DB plan, benefit payments to plan participant paid accordance with plan > recalculate

benefit 정도는 계산할수있다. pension asset은 actuary에게

 

401(K)