[19:08:58] --------------------------Paper P7-------------------------[19:09:01] babar2012: {dmwm} yes - we should e.g. the prospective audience, we need to establish
that in the first place, as we agree the terms of the assuranc service:
[19:10:02] dmwm: coolit, fatina,amanda,kingy,passed,studyhard -- welcome please input :)
[19:10:25] kingy: do you mean whether it's a review engagement, due diligence etc?
[19:10:34] thetominator: can never give 100% assurance due to auding being on a test basis
[19:11:13] kingy: so the assurance is limited not like audity which is positive assurance?
[19:11:28] babar2012: :yes:
[19:11:54] thetominator: the annual audit will be a high level of assurance
[19:12:24] fatina: The review will have limited assurance
[19:12:30] coolit: {kingy} yes coz u are not using full audit procedures,normally use analytical and
enquiry
[19:12:35] drumgorilla: What has negative assurance?
[19:13:20] fatina: Neg Ass-ce is when you say that nothing has come to the auditor's attention that
make him believe that there is a material misstatement
[19:13:21] kingy: thanks
[19:13:37] passed: {fatina} yes
[19:13:49] drumgorilla: Yeah but I thought negative assurance was used in any other assurance
services
[19:14:15] fatina: all except for the audit
[19:14:21] passed: {drumgorilla} agree
[19:14:32] drumgorilla: So, it can't be moderate or high then?
[19:14:55] drumgorilla: It can only be negative, if performing an assurance service other than a
standard audit...
[19:14:57] passed: it is moderate level of assurance.
[19:15:08] drumgorilla: How can it be negative and moderate?
[19:15:20] kingy: I thought only negative when agreed upon procedures or compilation
engagements - is this wrong?
[19:15:44] passed: i think negative is same as moderate level of assurance
[19:16:07] passed: lke a review engagment
[19:16:22] passed: i stand to be corrected
[19:16:28] thetominator: agreed upon proceedures can have no assurance if you are just asked to
verify a balance etc
[19:16:37] fatina: I think moderate, high or low are the words more suitable for risk of significant
misstatement
[19:16:42] dmwm: as far as assurance services're concerned ONLY two types of assurance i.e.
High/Moderate
[19:16:47] fatina: may be we are confused here?
[19:17:13] passed: {dmwm} yes
[19:17:16] drumgorilla: Has anyone got a textbook handy?
[19:17:29] babar2012: {fatina} Lets not be confused: Re assurance serv: just concentrate on
High/Mod serv;
[19:17:31] fatina: I've got a Kaplan's study system
[19:17:54] kingy: {dmwm} thanks I've checked my pocket notes and you're right
[19:18:18] fatina: {babar2012} but in Kaplan I just see Positive and degative assurance, not
moderate and high
[19:18:52] babar2012: Lets talk about the REPORT issued by the Accountant Re Assurance Serv;
[19:18:52] thetominator: the level of the assurance will be high/moderate but the report will be
positve/negative
[19:18:57] fatina: {babar2012} I remember that last year I read something about high and moderate
concerning the assurance but in this year study text I don;t see it
[19:19:23] babar2012: PS: we're doing it as per OT notes :( so please check OT notes - thanks
[19:19:38] fatina: {babar2012} ok
[19:19:56] drumgorilla: Sorry, reviews have negative assurance. Assurance services give reasonable
or limited assurance.
[19:19:59] passed: we have different types LEVELS of assurance and OPINION issued
[19:21:15] passed: moderate/high refer to levels
[19:21:15] passed: and negative and positive
[19:21:15] passed: refer to opinion
[19:21:15] dmwm: Report should've: Title, Addressee, Conclusion, Date Signed, Name/address of
Accountant / Practitioner: precisely same as audit report ? ?
[19:21:22] --------------------------Paper P7-------------------------[19:21:25] dmwm: + Assurance obviously being High/Mod:
[19:21:57] dmwm: + Accountants responsibilities
[19:22:04] thetominator: ISAE 3400 and reference to it in your report
[19:22:49] thetominator: intended users
[19:23:24] babar2012: :yes: + the audience, if restricted to certain parties, their identification &
purpose of report;
[19:23:38] kingy: limited procedures have been carried out
[19:23:40] babar2012: {thetominator} spot on :) !!
[19:23:55] passed: the timing of report
[19:24:04] passed: the methodology used
[19:24:07] coolit: Terms or reference
[19:24:22] babar2012: ISAE = International standard on assurance Engagement ???
[19:25:08] fatina: yes
[19:25:11] dmwm: {babar2012} Yea - i think so
[19:25:22] fatina: but ISAE 3400 is the one for prospective info
[19:26:06] fatina: The one for reviews is the ISRE 2400 or ISAE 3000
[19:26:06] coolit: I saw ISA 910 for reviews and Isa810 for PFI,is it new.
[19:26:08] thetominator: {fatina} your right
[19:27:32] fatina: {coolit} Is it also in examinable documents?
[19:27:32] dmwm: {fatina} its samething .....
[19:27:38] --------------------------Paper P7-------------------------[19:27:46] dmwm: See, when we undertake an assurance service: & we tlak about the subject
matter:
[19:27:57] dmwm: please note the subject matter could be any e.g. PFI
[19:28:13] fatina: hmmm.... I look now at the examinable doc's from Acca-global.com and there is
no ISA 910 within the ones
[19:28:37] margaret04: hi guys, what's this session about? any particular area of p7??
[19:28:51] coolit: it was my first time to c it too.
[19:29:49] babar2012: {margaret04} Ch 12- 16 as per opentuition notes
[19:30:12] babar2012: ok - please do check re particular ISA etc
[19:30:23] babar2012: that's it --we're done with Assur serv;
[19:30:27] babar2012: Lets move on then ..
[19:30:29] babar2012: ====
[19:30:30] babar2012: ===
[19:30:31] babar2012: ==
[19:30:31] babar2012: =
[19:30:35] fatina: {babar2012} wait
[19:30:41] babar2012: :) ok
[19:30:42] fatina: can I ask?
[19:30:46] babar2012: sure
[19:31:12] fatina: Can we name the assurance services which can exist? Review... what else?
[19:31:43] fatina: Due dill is not the assurance serv, right?
[19:31:53] kingy: isa 810 is summary financial statements
[19:31:58] fatina: or it is&
[19:32:01] fatina: ?
[19:32:25] babar2012: PFI, systems, HRM
[19:32:31] donnyry: {fatina} on some level, i'd say it is
[19:32:33] drumgorilla: Lets do PFI
[19:33:07] drumgorilla: PLEASE!!!
[19:33:07] babar2012: it could be anything really; think about about it ;
[19:33:08] kingy: due diligence is either a review or agreed upon procedure
[19:33:08] margaret04: what's chapter 12???
[19:33:08] babar2012: lets say you had an accounting firm;
[19:33:08] margaret04: is it group audits?
[19:33:38] babar2012: you might get people coming to you & do varoius things; e.g. check their Mgt
accounts i.e. forecasts of revenue, gross margins, dashborad reporting ;
[19:33:47] kingy: {margaret04} we're looking at opentuition p7 notes chapter 12 on non-audit
[19:34:00] margaret04: {kingy} thanks
[19:34:13] babar2012: {kingy} thank you ...
[19:34:15] babar2012: DONE
[19:35:47] babar2012: Ok - one famous area of P7 these days is RISK: i.e. Audit risk
[19:35:47] babar2012: Just to re-iterate we can use PEST, porters 5 forces, SWOT to identify risks;
[19:35:47] babar2012: Now lets talk about some industry SPECIFIC risks:
[19:35:47] babar2012: starting with FASHION industry ? ????????
[19:35:54] --------------------------Paper P7-------------------------[19:35:57] donnyry: Seasonal fluctuations in trading figures
[19:36:06] donnyry: quick turnaround of stock
[19:36:08] thetominator: Inventory could be out of date quickly
[19:36:26] dmwm: - Clothes're subject to change i.e. out of fashoin meaning your inventory is
redered OBSOLETE within no time: hence IAS 2 issues: valuations of stock
[19:36:42] kingy: cash business - theft (sometimes)
[19:36:46] donnyry: brand reputation significant (therefore its value to co)
[19:37:12] babar2012: :yes:
[19:37:12] thetominator: Recognition of Revenue if there is online sales
[19:37:30] kingy: {thetominator} nice one
[19:37:30] donnyry: international - FX, countries law etc...
[19:37:31] thetominator: or credit card sales sometimes takes 2 days to hit bank
[19:37:35] babar2012: Seasonality is very good observation ----> IAS 2 implications;
[19:37:46] donnyry: corporate social responsibilties - eg sweat shops, fur, etc...
[19:37:56] drumgorilla: large overheads, particularly with electricity
[19:38:58] drumgorilla: to keep shops looking nice overnight!
[19:38:58] babar2012: Since a lot of companies're importing from Asian countries; yes FX --> IAS 21
implications;
[19:39:05] --------------------------Paper P7--------------------------
[19:39:43] kingy: exposure to fx risk and interest rate risk if high street shops
[19:39:54] babar2012: Weldone all !!
[19:40:02] thetominator: maybe related party transactions
[19:40:22] babar2012: High-Tech Industry [ telecom, IT,] ???????????????? Key Risks ? audit,bus,fs ?
[19:40:47] kingy: like fashion, obsolete overvalued stock
[19:40:55] drumgorilla: e-biz relatively new, still learning things
[19:41:05] thetominator: staff may not be able to work system - Bus Risk
[19:41:08] fatina: IAS 29 also - as in developing countries could be the high inflation rate, and if they
have some subsidiaries they have to look into this problem
[19:41:16] passed: DEC'10 q1 relate to fashion industry
[19:41:16] drumgorilla: internet fraud
[19:41:20] passed: can we look at it
[19:41:29] babar2012: :yes: IAS2, IAS 21 call centres in india therefore conversion into Parent
company currency ;
[19:41:44] babar2012: e.g. DELL
[19:41:45] jnrp: Data protection risk due to hacking
[19:43:06] donnyry: Development costs capitalised
[19:43:06] babar2012: {donnyry} :yes~: spot on
[19:43:12] --------------------------Paper P7-------------------------[19:43:44] babar2012: E.g. software subscriptions / It Support : revenue should be recognised over
the course of contract; & not in one go ; IAS 18
[19:44:03] donnyry: {drumgorilla} we have Will Smith to sort that out
[19:44:23] drumgorilla: {donnyry} that's good to know
[19:44:41] amanda7787: {drumgorilla} :)
[19:44:44] babar2012: excellent stuff ....
[19:45:07] babar2012: & the last one but not the least; PHARMACEUTICALS ;;;risks ??????
[19:45:27] drumgorilla: massive turnovers
[19:45:36] babar2012: ias 18 ? ?
[19:45:43] babar2012: ias 38 ?
[19:45:43] kingy: patent not approved, licence not given for drug
[19:45:44] coolit: researh and deve
[19:45:45] drumgorilla: mysterious industry
[19:45:46] donnyry: Development costs capitalised..again (my fave)
[19:45:47] babar2012: R&D ?
[19:45:49] thetominator: R&D
[19:45:50] coolit: Ias 38
[19:45:56] babar2012: IAS 36 ?
[19:45:59] babar2012: impairment ?
[19:46:05] thetominator: Loss of Key Staff - Going concern
[19:46:05] babar2012: How do we audit that ?
[19:46:06] drumgorilla: patents is the main one
[19:46:27] babar2012: do we get an expert ?
[19:46:27] drumgorilla: yeah
[19:46:31] donnyry: Strict regulations surrounding the industry - health & safety etc...
[19:46:34] drumgorilla: auditors wouldn't know much more than what aspirins are for
[19:46:36] babar2012: what audit procedures to use to check the authenticity of patens ?
[19:46:36] coolit: Compliance Ias 37
[19:46:44] thetominator: Litigation
[19:46:46] babar2012: *patents
[19:47:00] drumgorilla: check with patents office, check org. contracts
[19:47:05] donnyry: {babar2012} agree to legal documentation, of some sort
[19:47:15] babar2012: {donnyry} :yes:
[19:47:18] drumgorilla: check minutes of meetings discussing development of patents etc
[19:47:19] passed: correspondence with regulators to confirm
[19:47:21] passed: patent
[19:47:26] passed: issuance
[19:47:49] thetominator: Firms Solicitor may have patents etc
[19:47:58] babar2012: so in terms of accounting assertions: what assertion're we auditing Re
patents:
[19:48:12] drumgorilla: existence
[19:48:23] kingy: rights and obligations
[19:48:24] drumgorilla: valuation?
[19:48:35] dmwm: {drumgorilla} i would say so ...
[19:48:38] thetominator: they fall into right accounting period
[19:48:52] thetominator: ammoritised over UEL
[19:49:03] babar2012: excellent - agreed to all :)
[19:49:27] babar2012: & what about OIL INDUSTRY the likes of SHELL, BP, ;;risks ????????
[19:49:47] drumgorilla: natural disasters!!!!!!
[19:49:50] thetominator: clean up costs with capitialisation
[19:49:55] thetominator: litigation
[19:49:57] babar2012: - environmental issues =====going concern ISA 57 0 !!!
[19:49:58] coolit: Impairment
[19:49:59] thetominator: Provisions
[19:50:01] donnyry: provisions for oil spills
[19:50:08] babar2012: IAS 37 -----contingent liab !!
[19:50:08] thetominator: Revenue Recognition
[19:50:14] kingy: provision for decommission and clean up not made
[19:50:22] drumgorilla: asset impairment
[19:50:25] donnyry: Value of drilling licences
[19:50:31] babar2012: {kingy} spot on !!! lets talk about R&D !1
[19:50:44] babar2012: DE-COMMISSIONING
[19:50:53] babar2012: whats that? & how to audit that ?
[19:51:01] kingy: wrong depreciation for different components on assets / wrong UEL
[19:51:40] dmwm: IAS 16 or IAS 38 ?
[19:51:50] dmwm: i.e. when we capitalise !
[19:51:55] donnyry: how to value an oil-rig?
[19:52:02] dmwm: Expert ....
[19:52:05] fatina: For any intangeable to be recognized the 4 criteria should be met
[19:52:06] dmwm: ISa 620 ..
[19:52:07] passed: the correponding liability
[19:52:56] dmwm: first, this's allowed under ias 38 i..e to capitalise Oil-rig proj ??
[19:53:07] passed: agree the discount rate used for discounting the decomission cost
[19:53:18] passed: and re-compute the it
[19:53:35] fatina: We capitalize when the criteria are met: 1. Identifiable, 2. COntrolled by the
entity, #. Will generate benefit, 4. can be measured reliably
[19:53:42] babar2012: precisely, in terms of accounting assertions then: check valuation, accuracy,
completeness ?
[19:53:56] kingy: existence
[19:54:27] drumgorilla: rights and obligations
[19:54:43] babar2012: awesome stuff !!!
[19:55:02] babar2012: PFI -----> how to audit ? procedures? key risks?
[19:55:05] kingy: we're all on fire tonight
[19:55:20] babar2012: Prospective financial information ---> PFI
[19:55:21] passed: enquire abt assumptions used
[19:55:25] fatina: Identify if the basis of PFI is sound
[19:55:36] babar2012: e.g. foreacsts, estimates;
[19:55:47] passed: and agree whether the assumptions are in line with the PFI
[19:55:54] babar2012: . Re revenue, expenditures etc
[19:56:06] thetominator: who prepared assumptins knowledge and experience
[19:56:09] kingy: analytical procedures used
[19:56:24] fatina: look through the prior year budgets and actuals and see how they correlate
[19:56:59] passed: reperformance on the figures
[19:57:00] drumgorilla: thanks guys, speak to ya later
[19:57:07] thetominator: timescale of PFI - Shorter time more reliable
[19:57:57] dmwm: WHAT IF - you were auditing NOKIA & their PFI on LUMIA 800 - their latest
/upcoming handset: what procedures would you use to justify the esimate ?
[19:58:03] fatina: see how long is the lifecycle of the previous model of LUMIA
[19:58:12] babar2012: {fatina} :yes:
[19:58:13] drumgorilla: use previous estimates for other new but similar phones
[19:58:21] Jahangiri: Hello concerned audience ... what is being discussed here ? anyone pls ?
[19:58:22] passed: what is Nokia assumptions on the sales figure stated
[19:58:22] babar2012: Benchmarking .
[19:58:28] thetominator: figures are arthimatic and accurate
[19:58:28] kingy: research competitor info to see if their assumptions are reasonable
[19:58:45] passed: {kingy} spot on
[19:58:48] babar2012: {Jahangiri} Ch 12 - 16 as per OT notes
[19:58:51] fatina: See which competitors are on market (competitor's similar models) or which are
going to be launched
[19:59:00] thetominator: intended user of PFI
[19:59:15] passed: {fatina} what is the reason for that procedure
[19:59:17] passed: ?
[19:59:19] Jahangiri: {babar2012} ok thnx
[19:59:29] dmwm: wow --- you guys know your sruff !!! lisa watch out ;) we're coming !!!
[19:59:43] dmwm: excellent session!!!
[19:59:48] fatina: {passed} to see if this time we do not have more competitors as per prior model of
LUMIA
[19:59:48] dmwm: OK - guys
[19:59:53] kingy: {dmwm} ha ha!!
[20:00:03] passed: {fatina} thanks
[20:00:13] dmwm: lets move on to INTERNAL AUDIT ? role ? value it adds?
[20:00:23] passed: {babar2012} {babar2012} this session should be saved
[20:00:33] babar2012: {dmwm} :yes:
[20:00:43] passed: first is compliance
[20:00:48] thetominator: internal audit should advise management whether there is effective
controls
[20:00:54] fatina: {passed} only for listed companies
[20:00:58] babar2012: please proceed to INTERNAL AUDIT ? role ? value it adds?
[20:01:01] thetominator: basically justify their existance as a department
[20:01:08] donnyry: sorry, what are we doing - i lost connection
[20:01:15] kingy: independent of management
[20:01:22] babar2012: {donnyry} internal audit , role, requirements
[20:01:23] fatina: {donnyry} Internal audit
[20:01:29] passed: provide operation audit
[20:01:50] babar2012: can we rely on their work ?
[20:01:52] Jahangiri: specialised assignments ... fraud etc
[20:01:54] fatina: can be mean of redusing external audit costs
[20:01:55] babar2012: & to what extent ?