Customized Technical Memorandum and Templates

Step 4. Draft Customized Technical Memroandums on high-risk areas

We can help to draft technical memorandum on your significant issues. These may include, but not limited to:

Adoption of new accounting / auditing standards
Revenue Recognition
Valuation of Material Assets, such as investment properties, business, shipping vessels
Justification for acceptance of a new client when prior period opinions are modified
Justification for going concern basis

These memorandum can help to concentrate all your objectives, risk assessment, application of accounting standards, internal control understanding, audit procedures and analysis of results and findings in one lengthy audit documentation, and thus allow easier review by AFRC inspectors, and they will not ask you to identify where the documentation is done on specific audit procedures relating to this significant risk area.

Price: From HK$5,000 per topics, with minimum purchase of 3 topics, Subject to complexity of high risk areas.

Customized Technical Memorandum

At EQC Compliance Advisory, we understand the importance of effective communication and documentation in the audit process. Our customized Technical Memorandum service is designed to address significant risk areas, areas with significant accounting estimates, and auditor judgment for audit engagements in accordance with the relevant Hong Kong financial reporting standards, such as SME-FRS, HKFRS for Private Entities and HKFRS.

Customized Technical Memorandum Topics

Our specialized team of auditors and consultants can draft tailored Technical Memorandum on a wide range of topics, including but not limited to:

EQC Compliance Advisory is prepared to draft Technical Memorandum on a wide range of topics that require a high degree of auditor judgment. Some of these topics include:

Impairment of Assets: Assessing impairment indicators, testing for impairment, and determining the recoverable amount of assets, including cash-generating units, can be a complex process that requires significant judgment and knowledge of the applicable Hong Kong financial reporting standards.

Deferred Tax Assets and Liabilities: Evaluating the recognition and measurement of deferred tax assets and liabilities, as well as assessing the realizability of deferred tax assets, can involve considerable auditor judgment, especially in cases where future taxable profits and tax planning strategies are uncertain.

Assessment of Audit Scope on Group Audit and Audit of Significant Components: Evaluating the scope of a group audit and determining the appropriate audit approach for significant components can be a complex process. This involves identifying significant components based on factors such as size, risk, and complexity, as well as assessing the work to be performed by component auditors. Our Technical Memorandum can provide guidance on how to approach the scoping process in accordance with the relevant Hong Kong financial reporting standards and auditing standards.
Related Party Transactions: Identifying and evaluating related party relationships, transactions, and balances often requires significant auditor judgment, particularly when determining the arm’s length nature of such transactions and assessing the adequacy of related party disclosures.

Employee Benefit Obligations: Estimating the present value of defined benefit obligations, determining the fair value of plan assets, and assessing actuarial assumptions for employee benefit plans can be complex and require considerable auditor judgment.

Going Concern Assessment: Evaluating an entity’s ability to continue as a going concern involves a significant degree of auditor judgment, particularly when considering the impact of uncertainties, financial difficulties, or other factors that could potentially affect the entity’s ability to continue its operations.

Fair Value Measurements: Estimating the fair value of financial instruments, investments, and other assets and liabilities can require significant auditor judgment, particularly when market inputs and observable data are limited or unavailable.

Revenue Recognition in Long-Term Contracts: Assessing the appropriate stage of completion for long-term contracts, determining the transaction price, and allocating revenue to performance obligations can be complex and often involve a high degree of auditor judgment.

Determination of Group and Component Materiality: Establishing materiality levels for group and component audits can be challenging and require significant auditor judgment. Factors to consider include the overall group materiality, the aggregation risk, and component-specific circumstances. Our Technical Memorandum can help auditors navigate the process of determining appropriate materiality levels for both group and component audits, ensuring a consistent and well-reasoned approach.

Assessment of Impact of a Newly Effective Accounting Standard, such as HKFRS 16 Leases: The implementation of new accounting standards, like HKFRS 16 Leases, can have a significant impact on an entity’s financial statements. Auditors must exercise judgment when assessing the impact of such changes, including the identification of lease arrangements, the appropriate accounting treatment, and the required disclosures. Our Technical Memorandum can provide guidance on how to assess the effects of newly effective accounting standards, ensuring compliance with the relevant Hong Kong financial reporting standards and assisting auditors in addressing the challenges that may arise during the transition.

Foreign Currency Translation: Assessing the functional currency of an entity, determining the appropriate exchange rates, and accounting for foreign currency transactions and translation adjustments can involve considerable auditor judgment, particularly in cases involving multiple functional currencies or volatile exchange rates.

Our team of experienced auditors and consultants is ready to assist your CPA firm in addressing these complex topics with well-reasoned and thorough Technical Memoranda that adhere to the relevant Hong Kong financial reporting standards.

Comprehensive Approach

Each Technical Memorandum is designed to cover all essential aspects of the audit process:

– Background information on the topic

– Identification of audit risks at the assertion level, financial statement level, inherent risks, and control risks

– Design of specific audit procedures in response to identified risks

– Summary of audit procedures performed on internal controls

– Discussion of audit findings, auditor’s judgment, and justification of accounting estimates

– Conclusion and relation to the audit opinion issued

Benefits of Customized Technical Memorandum

Our Customized Technical Memorandum service offers numerous benefits to CPA firms and their clients:

Streamlined Review Process: Consolidate all procedures performed on a single significant risk area or key audit matter, simplifying the review process for regulatory reviewers and inspectors.
Reusable Templates: Save time and resources by using our templates in other similar engagements, eliminating the need to draft memoranda from scratch.
Organized Audit Documentation: Consolidate audit documentation in a single document, making it easier to navigate through risk assessments, internal controls, audit responses, audit evidence, accounting estimates, and audit opinions.
Cost-Effectiveness: Avoid the high costs associated with hiring qualified auditors by outsourcing the task to EQC Compliance Advisory, significantly lowering your effective costs.
Reduced Compliance Risks: Address key audit issues in sizeable audit engagements, which are often the focus of regulatory authorities such as AFRC, SFC, and Law Society of Hong Kong, reducing compliance risks and the potential for sanctions, costs, or disciplinary actions.

Let EQC Compliance Advisory help your CPA firm enhance its audit documentation and streamline the audit process with our Customized Technical Memorandum service. Contact us today to learn more about how we can assist your firm in addressing complex audit issues and meeting regulatory requirements.