What is the best evidence that all life on Earth had a common ancestor? natural selection.
When the fair value of an asset is higher than the carrying of an asset the asset is said to be impaired?
Which of the following factors is most important in determining the competence of audit evidence?
Which of the following approaches Cannot be used to determine the fair value of an impaired asset?
A quoted price in an active market provides the most reliable evidence of fair value and shall be used to measure fair value whenever available.
Fair value is focused on the assumptions of the marketplace and is not entity-specific. It therefore takes into account any assumptions about risk. It is measured using the same assumptions and taking into account the same characteristics of the asset or liability as market participants would.
If there is no binding sale agreement, but an asset is traded in an active market, the asset’s market price less costs of disposal would provide the best evidence of fair value less cost to sell.
Audit evidence is more reliable when it exists in documentary form, whether paper, electronic, or other medium (for example, a contempo- raneously written record of a meeting is more reliable than a subse- quent oral representation of the matters discussed). audit evidence provided by photocopies or facsimiles.
Answer: A. Confirmation of accounts receivable balance. Confirmation of accounts receivable balance is considered to be the most reliable because it…
Fair value is a broad measure of an asset’s worth and is not the same as market value, which refers to the price of an asset in the marketplace. In accounting, fair value is a reference to the estimated worth of a company’s assets and liabilities that are listed on a company’s financial statement.
Fair value is the estimated price at which an asset can be sold or a liability settled in an orderly transaction to a third party under current market conditions. This definition includes the following concepts: Current market conditions.
In other words, the fair value of an asset is the amount paid in a transaction between participants if it’s sold in the open market. A willing buyer and seller have agreed upon this value. Due to the changing nature of open markets, however, the fair value of an asset can fluctuate greatly over time.
Quoted prices in active markets are the best evidence of fair values.
Fair value less costs to sell (FVLCS) is the amount obtainable from the sale of the asset in an arm’s length transaction between knowledgeable and willing parties, less the costs of disposal. This term is consistent with the measurement basis in IFRS 5 Non-current Assets Held for Sale and Discontinued Operations.
Key Takeaways: Assets are considered impaired when the book value, or net carrying value, exceeds expected future cash flows. If the impairment is permanent, is must be reflected in the financial statements.
Appropriateness is the measure of the quality of audit evidence, i.e., its relevance and reliability. To be appropriate, audit evidence must be both relevant and reliable in providing support for the conclusions on which the auditor’s opinion is based.
Because this form of audit evidence is generated by the auditor, not by the entity being audited, observation is considered to be strong evidence for existence.
Although the bank statements are in the possession of the client, they originated outside of the client and, relative to the other responses, they are the most persuasive.
Which of the following is the most objective type of evidence? the physical count of securities and cash. Evidence is generally considered appropriate when: it has the qualities of being relevant, objective, and free from known bias.
Materiality and the quality of internal control are important ingredients in determining it. A measure of the quality of audit evidence, and includes both the relevance and reliability of the evidence.
Explanation: The copies of sale invoice which are inspected by the auditor is the least persuasive evidence or we can say it is a conclusive evidence that can be used for auditing.
Fair value is an important metric for setting prices of assets because it allows for a more accurate assessment of the worth, even when there are no recent sales to reference. … The more accurate the financial assessment of the asset is, the more informed any decisions related to the asset will be.
Fair value refers to the actual value of an asset – a product, stock. … It is determined in order to come up with an amount or value that is fair to the buyer without putting the seller on the losing end. For example, Company A sells its stocks to company B at $30 per share.
Fair value refers to the measurement of assets and liabilities—primarily investments—at the expected price they would bring in the current market.
Salvage Value: An Overview. … Book value attempts to approximate the fair market value of a company, while salvage value is an accounting tool used to estimate depreciation amounts of tangible assets and to arrive at deductions for tax purposes.
Impairment testing was introduced to ensure that the carrying amount of an asset recognized on the balance sheets does not exceed its recoverable amount. … Those two value concepts are: fair value less cost to sell (FVLCS), and value in use (VIU) to test the integrity of the carrying amount of an asset.
IAS 16 prescribes that an item of property, plant and equipment should be recognised (capitalised) as an asset if it is probable that the future economic benefits associated with the asset will flow to the entity and the cost of the asset can be measured reliably.
Asset accounts that are likely to become impaired are the company’s accounts receivable, goodwill, and fixed assets. Long-term assets, such as intangibles and fixed assets, are particularly at risk of impairment because the carrying value has a longer span of time to become impaired.
Depreciation is recorded as an expense in the income statement to spread the original cost of a non-current asset over its useful life to match the revenue, it is generating. … As with the passage of time, the purchased assets become useless or unable to generate the necessary earnings.
IFRS Definition – Highly probable: Significantly more likely than probable. IFRS Definition – Probable: More likely than not. Other probability qualifications used in IFRS Standards are: Unlikely, Highly unlikely, Highly likely, Likely, More likely than not, Most likely, More likely and Virtually certain.
In accounting, impairment is a permanent reduction in the value of a company asset. … If the book value of the asset exceeds the future cash flow or other benefit of the asset, the difference between the two is written off, and the value of the asset declines on the company’s balance sheet.
The implied fair value of goodwill is equal to the fair value of Reporting Unit X of $1,000, less the recorded value of its net assets of $980 measured in accordance with ASC 805. Based on the results of step two of the impairment analysis, a goodwill impairment charge of $260 is recognized.
Terms in this set (11) The method that does not necessarily produce a declining pattern of depreciation over an asset’s service life is: The units-of-production method. Which of the following approaches cannot be used to determine the fair value of an impaired asset? … The market price of the asset.
Sufficiency of audit evidence is the measure of the quantity of audit evidence. Appropriateness of evidence is the quality of the evidence, i.e., its relevance and reliability to support the auditor’s opinion. Audit evidence includes information provided in books of accounts as well as information from other sources.
To achieve reasonable assurance, the auditor needs to obtain sufficient appropriate audit evidence to reduce audit risk to an acceptably low level. This means that there is some uncertainty arising from the use of sampling, since it is possible that a material misstatement will be missed.
- Physical examination. …
- Confirmations. …
- Documentary evidence. …
- Analytical procedures. …
- Oral evidence. …
- Accounting system. …
- Reperformance. …
- Observatory evidence.
The auditor can obtain different types of audit evidence, and it includes Physical Examination, documentation, analytical procedure, observations, confirmations, inquiries, etc.
One of the most common types of evidence auditors use is documentation. Documentation includes a written or pictured document, such as an invoice, picture, check stub, policy, or memo, that addresses an aspect of the audit being tested.
Examples of auditing evidence include bank accounts, management accounts, payrolls, bank statements, invoices, and receipts. Good auditing evidence should be sufficient, reliable, provided from an appropriate source, and relevant to the audit at hand.