The Pensive Chartered Accountant

    “In preparing for battle I have always found that plans are useless, but planning is indispensable.”_Dwight D. Eisenhower   ISA 300 is all about planning an audit, and it begins with establishing and understanding terms of engagement. Furthermore, it requires the establishment of the overall audit strategy. In short, it deals with the auditor’s responsibility to plan an audit of financial statement so that it will be performed in a professional manner. Now, the essence of this critical standard is to help the auditor to devote appropriate time and attention to important areas of the audit and to properly handle the overall audit engagement so that it is performed in a manner that is not only efficient but also effective. As the saying goes prior proper planning prevents poor a performance.    

    IFRS 15 provides a 5-step model for revenue recognition in business transaction. And the five essential steps are listed in order as follows:   Step 1: Establish a Contract with the Customer   Step 2: Identify the Performance Obligations in the Contract: Performance obligation is any good or service that contract promises to transfer to the customer.   Step 3: Determine the Transaction Price: The transaction price is the amount of consideration than an entity expects to be entitled in exchange for transferring promised goods or services to a customer.   Step 4: Allocate the Transaction Price to the Performance Obligations   Step 5 Recognize Revenue when (or as) the Entity Satisfies a Performance Obligation: A performance obligation is satisfied (and revenue is recognized) when a promised good or service is transferred to a customer. These are the 5-step model for revenue recognition in a nutshell according to Internat...

  Performance materiality also refers to the amount or amounts set by the auditor at less than the materiality level or levels in the financial statements for particular classes of transactions, account balances or disclosures. International Standard on Auditing (ISA) 320 requires auditor to determine performance materiality for purposes of assessing the risks of material misstatement and determining the nature, timing and extent of further audit procedures. It requires to include in documentation on the materiality for the financial statements as a whole, and where necessary, the materiality level or levels for particular classes of transactions, account balances or disclosures. It requires the auditor to determine at planning stage materiality at overall financial statement level, and where lower amount can impact the decision of user for specific transaction, balance and disclosure, such lower amount. In essence, ISA 320 deals with the auditor’s responsibility to app...