APPLIED AUDITING 2017 EDITION

UPDATES AND ERRATA NOTIFICATION

AS OF August 1, 2017

CHAPTER 5 Cash and Accrual Basis

Page Remarks
106 PROBLEM 5-16
Question No. 4
Assumption 1: Discounting without recourse
Difference between the proceeds and the face amount is considered loss on discounting.
Assumption 2: Discounting with recourse
Difference between the proceeds and the face amount is included in interest expense.

CHAPTER 6 Correction of Errors

Page Remarks
131 PROBLEM 6-7
Item letter b - On December 31, f should be December 31, 2016.
Item letter e - Additional industrial robots were acquired at the beginning of 20X0
(should be 2015).
133 PROBLEM 6-8
Item # 7 In January 2010 should be2018.

CHAPTER 8 Cash and Cash Equivalents

171 Requirement No. 2
Adjusted Petty cash fund
Coins and currencies 4,880
G. Ma, bookkeeper 880
ABC Co- replenishment check 2,800
Adjusted petty cash fund 8,560

CHAPTER 10 Loans and Receivables

Page Remarks
257 ILLUSTRATION: Sales Discount (PAS 18 vs. PFRS 15)
SOLUTION: (PAS 18)
Accounts receivable 100,000
Sales (instead of allowance for sales discount) 100,000

CHAPTER 15 Investment in Debt Securities

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567 Should be:
h = (c x 75%) + (e x 15%) + (g x 10%)
590 PROBLEM 15-7 Initial and Subsequent measurement, Derecognition and
Reclassification of FAAC Securities
CASE NO. 2
Note to teacher: You may ignore this since there is incomplete information to answer
some of the questions under this case.

CHAPTER 16 Investment in Associate

Page Remarks
616 Impairment losses: (the two paragraphs should be)
After application of the equity method, including recognizing the associate's or joint
venture's losses in accordance with paragraph 38, the entity needs to determine whether
there is any objective evidence that its net investment in the associate or joint venture is
impaired.

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 The entity applies the impairment requirements in IFRS 9 to its other interests in the
associate or joint venture that are in the scope of IFRS 9 and that do not constitute part of
the net investment.

CHAPTER 22 Intangible Assets

Page Remarks
865 Change in Estimate
On January 1, 2010 should be On January 1, 2011
866 PROBLEM 22-13
Patents: Gilead Enterprises began operations on January 2, 2009.
Goodwill: Legal expenses relative to incorporation. These were assigned to the account in
January 2009.

CHAPTER 26 Long-term Financial Liabilities and Debt Restructuring

Page Remarks
1007 Entries to record transactions in 2016
1. To record the issuance of the bonds on January 1, 2016
Interest Expense (Should be Cash) 5,788,532

CHAPTER 27 Lease
Page Remarks
1107 The annual lease payments are unchanged (150,000 payable at the end of 5th to 15th
year). Lessee's incremental borrowing rate at the beginning of 2020 is 12% per annum.
1112 *Note: if the sublease is treated as operating lease by the intermediate lessor, no journal
entry is to be made to derecognize the right of use asset.
1119 The journal entry on the part of the Seller-Lessee should be:
Cash 2,000,000
Rights of use asset 742,476
Gain on rights transferred 283,276
Lease liability 1,459,200
Building 1,000,000

CHAPTER 33 Statement of Cash Flows

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1338 Additional Acquisition or Partial Disposal of Investment in Subsidiary
Partial disposal: No loss of Control (Should be Financing Cash Flows)
Partial disposal: Loss of Control (Should be Investing Cash Flows)

CHAPTER 34 Audit Reporting

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1371 Examples of circumstances that would lead to modification of unmodified auditors report
There is a limitation on the scope of the auditors work (Qualified or Adverse Opinion)
Should be Qualified or Disclaimer
There is a disagreement with management regarding the acceptability of the
accounting policies selected, the method of their application or the adequacy of
financial statement disclosures. (Qualified or Disclaimer of Opinion)
Should be Qualified or Adverse
1371 Application in selecting modified opinion
Giving Rise to the Modification Auditors Judgment about the Pervasiveness of
the Effects or Possible Effects on the Financial
Statements
Material but Not Material and Pervasive
Pervasive
Financial statements are materially Qualified opinion Adverse opinion
misstated
Inability to obtain sufficient Qualified opinion Disclaimer of opinion
appropriate audit evidence

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DEBT SECURITIES (ASSET AND LIABILITIES)
Alternative computation for the present value end of the year for interest bearing debt instrument
with unreasonable interest rate or non-interest bearing note is:
1. For Assets (e.g. investment in debt securities, loan receivable, etc.)
Present value end of the year = [(Present value beginning of the year X (1+ (effective interest
rate x months outstanding/12)) TOTAL collections - Accrued Interest]
2. For Liabilities (e.g., notes payable, loan payable, etc.)
Present value end of the year = [(Present value beginning of the year X (1+ (effective interest
rate x months outstanding/12)) TOTAL payments - Accrued Interest]

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