29 November 2011
why SA 501 talks only about 3 components viz., inventory, litigation & Claims and segment information??? I mean why not other significant components, as auditor is responsible to obtain audit evidence in every component that he conducts audit...
Please justify your answer by citing any authoritative pronouncement
The name of SA 501 itself states the reason for inclusion of only four parts in this standard.
The name is Audit Evidence—Specific Considerations for Selected Items. The areas in this standards are prone to fraud and error and can be easily manipulated to increase or decrease profits of the concern.
Kingston Cotton Mills is an landmark judgement in which the company manipulated value of stock for years before it was discovered.
To ensure that there is no manipulation of profit as such three parts are included here in as stated by you above. Earlier Valuation and disclosure of Long Term Investments was also an part of the standard (Erstwhile AAS -34)
CAclubindia
