ENTITY AND ITS
THE ENTITY AND ITS ENVIRONMENT
The auditor shall obtain an understanding of the following:
a. Relevant industry, regulatory, and other external factors
including the applicable financial reporting framework.
Information is material if its omission or
misstatement could influence the
economic decision of users taken on the
basis of the financial statements.
Materiality may be viewed as:
The largest amount of misstatemen
Presented by: Group III
The auditor develops audit objectives that relate to
management assertions about the financial statement
components. To achieve audit objectives, the auditor
Is performed on the assumption that the sample selected for testing
is representative of the population. Thus, an inference or conclusion
can be drawn about the characteristics of the population based on
the sample results.
RA 9298: The
(a) The standardization and regulation of
(b) The examination for registration of
certified public accountants; and
(c) The supervision, control, and regulation
of the practice
Chapter 1 Auditing
and Assurance Services
Assurance Service Elements
Assurance services are (1) independent
(2) professional services that (3)
improve the quality of information,
or its context, (4) for decision
makers. Assurance services include
What is audit planning?
Why do we need to plan?
Who are involved in planning the audit?
How do planning helps auditors?
When do we plan?
Where do we plan?
Establishing the overall audit strate
ASSERTIONS AND AUDIT
Assertions (or management
assertions)are representations by
management, explicit or otherwise, that
are embodied in the financial
statements. These assertions relate to
Renzo, a resident citizen, deposited P 2,000,000 in the 180 day time deposit of
Banco de Baguio. The deposit pays 8% interest. Compute the final tax on maturity
of the deposit.
Rate of int
1. On March 14, 2014, Rapture Corporation issued at 103 plus accrued interest, 1,000 of its 9%,
1,000 bonds. The bonds are dated January 1, 2014 and mature on January 1, 2024. Interest
is payable semi-annually on January 1 and Ju
Liabilities- Debt Restructuring & Post Retirement Benefit
1. On December 31, 2015, Nolte Co is in financial difficulty and cannot pay a note due that
day. It is a P 600, 000 notes with P 60,000 accrued interest payable to Piper, Inc. Piper
agrees to accep
Investment Property & Other Investments
1. Paramount purchases a landed property at a cost of P100,000,000. In the sale and purchase
agreement, P20,000,000 of the purchase price is attributed to the land portion. The building
consists of 10 floors of equa
1. On January 2, 2014, Journal Company purchased goods from Times Company, a company in
Singapore for an invoice smount of $100,000 if paid within the normal credit period of 10 days.
However, payment may be deferred up to 3 months subject to a
Financial instruments-Equity Instruments
1. Blue Company acquired the following portfolio of equity instruments during 2014 and reported
the following balances at December 31, 2014. No sales occurred during 2014. All declines are
considered to be temporar
Provisions & Other Current Liabilities
1. The Top Bottling Corporation, embarked on a promotional program whereby a key chain
costing P15 each is given away for every 10 bottle crowns returned plus P5. Top Bottling
Corporation estimates that only 40% of t
Comprehensive Income, Acctg. Changes & Interim Reporting
1. X.Company, a car rental company, acquires vehicles with the intention of holding them as
rental cars for limited period and then selling them. As of December 20, 2014, car A was
sold for P120,000
Liabilities Deferred Tax
1. Triad Corporation reported a pretax financial income of P5,000,000 for the year ended
December 31, 2014. The following items are included in the determination of financial income:
Provision for litigation loss which will become
Property, Plant and Equipment
1. The Mimic Company imported a new machineat a peso equivalent of P330,000. The company
has to pay additional cost of importing the asset such as P10,000 import duties and P15,000 a
refundable purchase taxes. Costs of transp
Pre-week 29 Batch
1. Majors Corporation had income from continuing operations of P1,800,000 in 2015.
During 2015 it disposed of its repair division at a pre-tax gain of P 27,000. Prior to
disposal, the division operated at a pre-tax loss of P 45,000. The
Cash and Accrual/Cash flows
1. In its accrual basis income statement for the year ende December 31 2014 nHolland
Company reported revenue of P3,100,000. Additional information were as follows:
Accounts Receivables, December 31 2013
Accounts Receivables, D
Practical Accounting 1
Statement of Financial Position
1. The accounts and balances shown below were gathered from Clown Companys trail
balance on December 31 2014. All adjusting entries have been made.
Cash and cash equivalents, P 200,000; Loans and Rece
Financial Instrument Debt Instruments
1. On May 1, 2014, Golden Company purchased a short-term P4,000,000 face value 9% debt
instruments for P3,720,000 excluding the accrued interest and classified it as a investment to
profit or loss which is based on th
SYSTEMS PLUS COLLEGE FOUNDATION
OFFICE OF STUDENT SERVICES
STUDENT ACTIVITY EVALUATION
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Cash & Cash Equivalents
1. Lipton Company Shows the following account balances in their financial records as of
December 31, 2014:
Checking account at Morgan Bank, P(20,000); Checking account at Land Bank, P500,000;
Payroll account- National Bank, P100,00
Government Grant and Agriculture
1. On January 2 2015 Bugs acquired a tranferable nine-year taxi license by way of
government grant when the fair value of the license was P180, 000. The license is given
free of charge to the entity on the basis of Bugs pe
1. Hook Company lease equipment to Emley Company on July 1, 2015 for a one-year
period expiring June 30, 2016 for P60,000 a month. On July 1, 2016, Hook leased this
piece of equipment to Terry company for a three-year period expiring Ju
Book Value & Earnings Per Share
1. White Corporations December 31, 2015 balance sheet reports the following shareholders
8% Cumulative Preference share capital, P100 par value per share,
10,000 shares issued and outstanding
Ordinary share capital,
Topic: How Managerial Accounting Adds Value to Organization
Asking the question why we need accounting is like asking a farmer why we need rain.
Managerial Accounting has become the most
1. On January 1,2014, M Company acquired an intangible asset from a foreign company.
The invoice price of the intangible was P10,000,000 subject to a 10% discount if acquired
on a cash basis. M company paid P2,000,000 import duties and professi