10+ Vital Therapeutics & Formulations Interview Questions and Answers

Bank balance in financial statements can be audited by verifying bank statements, reconciling balances, and testing internal controls.

• Verify bank statements to ensure accuracy of reported balance

• Reconcile bank balance with general ledger balance

• Test internal controls related to bank transactions

• Confirm balances with the bank directly

• Review any unusual transactions or discrepancies

• Consider the risk of fraud or error in bank transactions

The five criteria to recognize revenue as per Ind AS 115 are identification of contract, identification of performance obligations, determination of transaction price, allocation of transaction price, and recognition of revenue when performance obligations are satisfied.

• Identification of contract

• Identification of performance obligations

• Determination of transaction price

• Allocation of transaction price

• Recognition of revenue when performance obligations are satisfied

A provision for doubtful debt is a journal entry made to account for potential losses from customers who may not pay their debts.

• Provision for doubtful debt is recorded as an expense in the income statement.

• It is created by debiting the provision for doubtful debt account and crediting the bad debt expense account.

• The provision is based on an estimate of the amount of debt that is likely to become uncollectible.

• The provision is usually a percentage of the accounts receivable ...read more

The three major activities in cash flow statement are operating activities, investing activities, and financing activities. Purchase of fixed assets would fall under investing activities, while repayment of loans would fall under financing activities.

• Operating activities involve cash flows from day-to-day business operations, such as sales and expenses.

• Investing activities include cash flows related to the purchase and sale of long-term assets, like property, plant, and equip...read more

Audit revenue expense of rent by verifying lease agreements, rent invoices, and bank statements.

• Verify lease agreements to ensure rent amount and terms are accurate

• Check rent invoices for proper recording and classification

• Reconcile rent payments with bank statements

• Ensure rent expense is recognized in the correct period

• Consider any related party transactions or potential conflicts of interest

Materiality levels for mutual fund audit

• Consider the size and nature of the mutual fund company

• Assess the impact of misstatements on financial statements

• Refer to industry standards and regulatory requirements

• Consult with senior auditors and management

• Use professional judgement to determine materiality levels

Reconciling bank balances involves comparing the bank statement with the company's records to identify and resolve any discrepancies.

• Obtain the bank statement and compare it with the company's records of transactions.

• Identify any discrepancies such as missing deposits or withdrawals, bank errors, or outstanding checks.

• Adjust the company's records to match the bank statement by recording any necessary corrections.

• Ensure that the ending balance on the bank statement matches the...read more

The 5 steps of Revenue recognition are identification of the contract, identification of performance obligations, determination of transaction price, allocation of transaction price, and recognition of revenue as performance obligations are satisfied.

• Identification of the contract: Determine the existence of a contract with a customer.

• Identification of performance obligations: Identify the separate performance obligations in the contract.

• Determination of transaction price: De...read more

Assertions and procedures for auditing debtors

• The existence assertion: ensuring that the debtors actually exist and are valid

• The completeness assertion: ensuring that all debtors are included in the financial statements

• The valuation assertion: ensuring that the debtors are valued correctly

• The rights and obligations assertion: ensuring that the company has the right to collect the debt and that the debtors have an obligation to pay

• The cutoff assertion: ensuring that all transa...read more

Deferred revenue refers to income received by a company in advance of earning it, resulting in a liability on the balance sheet.

• Deferred revenue is also known as unearned revenue.

• It is recorded as a liability on the balance sheet until the revenue is recognized.

• Common examples include magazine subscriptions, annual maintenance contracts, and advance payments for services.

• Once the revenue is earned, it is recognized on the income statement.

• Deferred revenue is important for acc...read more

Fixed assets are audited by verifying physical existence, ownership, valuation, and depreciation methods.

• Verify physical existence by conducting physical inventory counts.

• Confirm ownership by reviewing title deeds and purchase agreements.

• Ensure accurate valuation by comparing book value to market value.

• Review depreciation methods and calculations for accuracy.

• Check for impairment indicators and assess if any assets need to be written down.

• Examine maintenance records to ensure...read more

The 3 golden principles of accounting are: 1) Debit the receiver, credit the giver 2) Debit what comes in, credit what goes out 3) Debit expenses and losses, credit income and gains.

• Debit the receiver, credit the giver: when an asset is received, it is debited and when a liability is given, it is credited

• Debit what comes in, credit what goes out: when cash is received, it is debited and when cash is paid, it is credited

• Debit expenses and losses, credit income and gains: when ...read more

Subsequent events are events that occur after the balance sheet date but before the financial statements are issued.

• Subsequent events can be classified as either adjusting or non-adjusting events.

• Adjusting events provide evidence of conditions that existed at the balance sheet date and require adjustment to the financial statements.

• Non-adjusting events do not require adjustment to the financial statements but may require disclosure in the notes to the financial statements.

• Exa...read more

Various items in balance sheet & PL are treated differently based on their nature. Assets can be classified as current, non-current, tangible, intangible, etc.

• Balance sheet items are classified as assets, liabilities, and equity.

• Assets can be further classified as current assets (e.g. cash, accounts receivable) and non-current assets (e.g. property, plant, equipment).

• Liabilities can be classified as current liabilities (e.g. accounts payable) and non-current liabilities (e.g....read more

Bank reconciliation is the process of comparing a company's records of its bank transactions with the bank's records to ensure they match.

• Bank reconciliation helps identify discrepancies between the company's records and the bank's records.

• It involves comparing the ending balance on the bank statement with the ending balance in the company's general ledger.

• Common reasons for discrepancies include outstanding checks, deposits in transit, bank fees, and errors.

• Reconciling the b...read more

Audit procedures are specific tasks and methods used by auditors to obtain evidence and evaluate the financial statements of a company.

• Audit procedures involve gathering evidence to support the financial information presented in the company's financial statements.

• They include activities such as inspection, observation, inquiry, confirmation, and recalculation.

• Examples of audit procedures include examining invoices and receipts, testing internal controls, and confirming accoun...read more

Audit assertions are claims made by management regarding the accuracy of financial statements.

• Existence - assets and liabilities actually exist

• Completeness - all transactions and accounts are recorded

• Valuation - assets and liabilities are recorded at the correct value

• Rights and obligations - assets are owned by the entity

• Presentation and disclosure - financial statements are properly presented and disclosed

• Example: Existence assertion would involve physically verifying invent...read more

IFRS on revenue recognition focuses on when revenue should be recognized in financial statements.

• Revenue should be recognized when it is probable that economic benefits will flow to the entity and the revenue can be reliably measured.

• Revenue should be recognized at the fair value of the consideration received or receivable.

• Revenue recognition criteria may vary based on the type of transaction, such as sale of goods, rendering of services, or construction contracts.

• IFRS 15 pro...read more