Every company or business around the world operates in a risky environment. These risks can be internal, such as risks of operations or processes not going according to plan. Similarly, these risks can also be external and caused by several factors. Some of these which dictate risk are political, environmental, technological, economic, social, or legal […]
Limitations of Internal Control Read More »
Due to various factors, such as time or costs, auditors do not apply audit procedures on all items when auditing the financial statements of a company. Therefore, they apply procedures on some items, which they select using audit sampling. There are several audit sampling techniques that auditors may use. However, it may cause some auditors
Tolerable Misstatement Read More »
Due to the agency problem, shareholders appoint auditors to verify whether the financial statements prepared by the management of a company are free from material misstatements and present a true and fair view. Auditors may also test the internal controls of a company to identify any weaknesses and provide recommendations about them to the management.
4 Types of Audit Opinion Read More »
Audit firms provide clients with various services. Most prominently, audit firms render the services of external auditing. In this process, auditors examine the financial statements and internal controls of the client and form an opinion regarding whether they present a true and fair view and free from material misstatements. During an external audit, auditors perform
Agreed Upon Procedures Read More »
When it comes to audit evidence, auditing standards require auditors to obtain audit evidence that is sufficient and appropriate. While the sufficiency of audit evidence relates to its quantity, its appropriateness depends on its quality. The reason why auditors obtain the evidence is to form an opinion on whether the financial statements present a true
Substantive Audit Procedures Read More »
Every investment come with risk associated with them. Some of them might be diversifiable and some others might be nondiversifiable. Nondiversifiable risk of an investment or security typically incurs as a result of not being able to diversify through multiple portfolio. In this article, we cover the nondiversifiable risk associated with investment or security including
Nondiversifiable Risk Read More »
Suppose you put 10,000 in a saving account with the interest of 8% and keep it there for 5 years. What would the future value at the end of year 5? With a single investment like this, its expected value at the end of year 5 is called the future value (FV) of a single
Future Value (FV) of a Single Amount: Definition, Formula, and How to Calculate It Read More »
There are commonly two types of costs associated with products, fixed and variable costs. In many cases, there are semi-variable costs that can either be termed as variable or fixed costs. It is important to differentiate between the portion of each cost type to analyze the profit margins of each product and improve the total
The High Low Method: How to Split Variable and Fixed Costs Read More »
The operating assets of a company are directly responsible for producing income from operations. These assets include both fixed and current assets. The net operating assets figure deducts the operating liabilities from the operating assets. The return on net operating assets would then indicate the relation between the net income and operational efficiency of the
Return on Net Operating Assets (RNOA): Definition, Formula, and How to Calculate It Read More »
Large companies work with several divisions and different segments. For publically held companies, the SEC requires them to report profits from each segment or division separately. The profit margins arising from each segment or division are termed as the Segment margin. What is Segment Margin? The segment margin is the profit (or loss) arising from
Segment Margin: Definition, Formula, and How to Calculate It Read More »
