The 7 Stages of Planning an Audit

The planning of an audit is a fundamental part of completing a successful assignment. The process can be broken down into the following stages;

Stage 1- Appointment

The main focus of this stage is ensuring that there are no factors that prohibit the assignment from commencing. The following procedures are carried out as part of this stage;

  • Ensure client due diligence and anti- money laundering information is up to date.
  • Review whether there are any Ethical threats to the assignment and where such threats occur, are there safeguards that can be applied to allow the engagement to continue.
  • If there was a different auditor in place in the prior year, has sufficient appropriate evidence been obtained concerning the opening balances. In such instances, professional clearance should be obtained from the outgoing auditor.
  • A letter of engagement is prepared and signed.

Stage 2- Risk Assessment

This stage involves an assessment of the company’s situation from various sources with a view to determining the overall audit risk. This stage involves;

  • A review of issues arising in previous years.
  • A review of the permanent audit file of the company and any relevant correspondence during the year.
  • Discussions with management on any relevant issues which occurred during the year.
  • A review of draft financial information to compile a preliminary analytical review.
  • A review of the internal controls in place in the company.
  • A calculation of materiality
  • A preliminary assessment of going concern.

Stage 3- Audit Approach

Following on from stage 2, should be a summary of the key audit risks and how these risks affect the planned approach of the audit. The overall risk (including fraud risk) should be assessed as low, medium or high.

For each individual financial statement level, a planned audit approach should be documented. All risk areas should have an appropriate plan to deal with that risk. The work program of the audit should be driven by this.

Another matter to be considered at this stage is the framework on which the financial statements will be prepared and if reduced disclosure options are available.

Stage 4- Administration

An appropriate staffing plan should be put in place for the assignment (with appropriate skillsets and experience assigned to the team). A timetable for completion of the job should be agreed with the client.

Stage 5- Audit team briefing

A team meeting sets out the planned audit approach, the key risk areas, how these risks will be addressed and clarifies each members role in the assignment.

Stage 6- Client Service

Consider whether any useful recommendations can be made to the client regarding any issues identified.

Stage 7- Client Communication

The client should be notified of any changes in the nature/scope of the assignment. In addition to this, the information required by the audit team is communicated to and agreed with the client.

What questions do you have?

We are happy to help. Please post your comment below or contact our friendly and knowledgeable team on 01 677 9000. 

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Posted on July 3, 2018 by Cooney Carey

VAT on Passenger Vehicles

When a business is considering purchasing a vehicle the ultimate cost of the vehicle will be determined by a business’s ability to recover the VAT.

Most businesses are aware that VAT can be reclaimed in respect of the purchase of a commercial vehicle but may not be aware that an element of VAT can be reclaimed in respect of passenger motor vehicles.

To reclaim VAT on a passenger motor vehicle the following conditions must be met;

  • The vehicle must be first registered for VRT from 1 Jan 2009
  • The CO2 emissions level must be less than 156g/km and
  • The vehicle must be used for at least 60% business use for the first two years.

Where all of the above conditions are met 20% of the VAT on the purchase price can be reclaimed.

However, if the business use falls beneath the 60% in the first two years a portion of the VAT reclaimed will need to be repaid to Revenue.

What questions do you have?

We are happy to help. Please post your comment below or call Eamonn Madden, Tax Manager at Cooney Carey, on 01 677 9000. Alternatively, send him an email: emadden@cooneycarey.ie

To keep in touch, connect with us on LinkedIn.

If this article helped you, please share it with other businesses.

Posted on July 3, 2018 by Eamonn Madden

Taxation of Cryptocurrency Transactions

Background

With the growing number and use of cryptocurrencies (Bitcoin, Ethereum, Lightcoin, Ripple etc.) Revenue issued ac manual in May 2018, setting out the tax implications.

Business accepting cryptocurrencies

For business which accept payment for goods or services in cryptocurrencies there is no change to when revenue is recognised or how taxable profits are calculated. No special rules apply.

Income Tax

The profits and losses of a non-incorporated business on cryptocurrency transactions must be reflected in their accounts and will be taxable on normal income tax rules.

Corporation Tax

The profits and losses of a company entering into transactions involving cryptocurrency would be reflected in accounts and taxable under normal CT rules. As cryptocurrencies are not a functional currency (as defined), company accounts cannot be prepared in cryptocurrencies.

Capital Gains Tax

If a profit or loss on a currency contract is not within trading profits, it would normally be taxable as a chargeable gain or allowable loss for CGT purposes.

VAT

Cryptocurrencies are regarded for VAT purposes as “negotiable instruments” and exempt from VAT.

Financial services consisting of the exchange of bitcoins for traditional currency are generally exempt from VAT

Income received from cryptocurrency mining activities will generally be outside the scope of VAT.

VAT is due in the normal way from suppliers of any goods or services sold in exchange for bitcoin or other similar cryptocurrencies. The taxable amount for VAT purposes will be the Euro value of the cryptocurrency at the time of the supply.

PAYE treatment – salary paid in cryptocurrency

Where wages/salaries are paid using cryptocurrency, the value of the emolument for the purposes of calculating payroll taxes is the Euro amount attaching to the cryptocurrency at the payment date.

Valuation of Cryptocurrencies

The value of cryptocurrencies may vary as between different exchanges. Therefore there may be more than one exchange rate. A reasonable effort should be made to use an appropriate valuation for the transaction in question.

What questions do you have?

We are happy to help. Please post your comment below or contact Gerry Higgins, Tax Partner on 01 677 9000 or by email: ghiggins@cooneycarey.ie.

If this article helped you, please share it with other businesses.

Posted on June 26, 2018 by Gerry Higgins

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