International Accounting Standards: [International_Accounting_Standards] Re: I need help to judge the amount of prepaid insurance???

--- In International_Accounting_Standards@yahoogroups.com, Muhammed
Faisal Muhammed Shafi <m_faisal_shafi@...> wrote:
>
> I'm performing an audit of a client who provided trial balance and
some supporting documents. The problem is that between these documents
there are some photo copies of receipts of premium payment produced by
the insurer. First issue is that these documents do not mention covering
period I think that it will be annual. The second issue is that I
whether should I take the cheque date or receipt date as start date. The
third issue is that if these dates are any day of the month so should I
calculate the period on the basis of days or round days to one month.
>
> Please reply me ASAP because I'm working at home and I've to
submit it tomorrow for partner review.
>
> ---------------------------------
> Never miss a thing. Make Yahoo your homepage.
>

Hi, you have to assess as to whether the insurance premium is an item
that material for you to select and audit in the first place. You should
also consider other implications including the deductibility of this
insurance in the context of tax provision for audit purposes. If the
amount involved is immaterial, you may form such conclusion and
therefore need not prform any verification at all! If this is an item
material enough to warrant an audit by you, you should report
accordingly the amount of the insurance premium that is supprted only by
photocopies. Word of CAUTION here, your partner/boss may question you in
return is it due to the client unable to provide you the originals or u
did not ask? Or is it because the timing when u requested this from your
client is too late? Be prepared to justify! In addition, any official
letter or note that you have requested such original documents as proof?
On the second part of your question, insurance premium usually is
PREPAID (but not necessary always the case as there are many people pay
late as well). Based on the official receipt date to calculate the
respective amount of insurance premium to be recognised as expense in
income statement and also the prepayment amount is something done on
"best estimate or guessin g".However, the difference if any may not be
material. Since the deadline of submitting the file is URGENT, you don't
have any choice but use this approach. Probably in your future audit,
allocate sufficient time for you to take note of these issues early and
highlihgt accordingly to clients and most importantly if it is serious
enough to your manager or partner accordingly. By doing this, you are
projecting that you are a person that plan and organise your work well!
This will add lots of marks to yourself when comes to increment and
promotion! Happy auditing and Happy New Year!