specofic audit procedure
Conclusion
Based on the explanation above, we can make a conclusion. The Tai Yau Tour Travel Limited may concern about their strength and weakness in the objection. The strength includes that their service is offered in Mainland and the contract and profits can be regarded as antecedent activity. According to the Agency Principle, Agents’ activities are equivalent to the company’s. But weaknesses are showing as they advertised in Hong Kong, the contract was made in Hong Kong and Profit was arising in or derived from Hong Kong. In other words, they carried on business in Hong Kong. Furthermore, the location of Customers is in Hong Kong and there is no office which means there is no PE in Mainland. It is obviously that the weakness is more convictive than their strength. So our conclusion is that the objection would not be succeed. The profit of $800,000 will not be fully exempted from IRD’s perspective but be portioned depends on the actual situation.
The specific audit procedures to obtain evidence regarding the opening balances include:
Current assets and liabilities. Audit evidence about opening balances for current assets and liabilities may be obtained as part of the current period’s audit procedures. For example, the collection (payment) of opening account receivable (account payable) during the current period will provide some audit evidence of their existence, rights and obligations, completeness and valuation at the beginning of the period.
Opening inventories. In the case of inventories, however, the current period’s audit procedures on the closing inventory balance provide little audit evidence regarding inventory on hand at the beginning of the period. Therefore, additional audit procedures may be necessary, and one or more of the following may provide sufficient appropriate audit evidence: (1) observe a current physical inventory count and reconciling it to the opening inventory quantities, (2) perform audit procedures on the valuation of the
Based on the explanation above, we can make a conclusion. The Tai Yau Tour Travel Limited may concern about their strength and weakness in the objection. The strength includes that their service is offered in Mainland and the contract and profits can be regarded as antecedent activity. According to the Agency Principle, Agents’ activities are equivalent to the company’s. But weaknesses are showing as they advertised in Hong Kong, the contract was made in Hong Kong and Profit was arising in or derived from Hong Kong. In other words, they carried on business in Hong Kong. Furthermore, the location of Customers is in Hong Kong and there is no office which means there is no PE in Mainland. It is obviously that the weakness is more convictive than their strength. So our conclusion is that the objection would not be succeed. The profit of $800,000 will not be fully exempted from IRD’s perspective but be portioned depends on the actual situation.
The specific audit procedures to obtain evidence regarding the opening balances include:
Current assets and liabilities. Audit evidence about opening balances for current assets and liabilities may be obtained as part of the current period’s audit procedures. For example, the collection (payment) of opening account receivable (account payable) during the current period will provide some audit evidence of their existence, rights and obligations, completeness and valuation at the beginning of the period.
Opening inventories. In the case of inventories, however, the current period’s audit procedures on the closing inventory balance provide little audit evidence regarding inventory on hand at the beginning of the period. Therefore, additional audit procedures may be necessary, and one or more of the following may provide sufficient appropriate audit evidence: (1) observe a current physical inventory count and reconciling it to the opening inventory quantities, (2) perform audit procedures on the valuation of the