Ayala Land Inc.

2. Identify one or two key audit matters highlighted in the audit report. Provide a
brief description of the key audit matter(s).
Real estate revenue recognition is one of the significant key audit matters
identified in the audit report. According to the report, revenue recognition systems and
procedures play a vital role in determining the transaction price, the likelihood of the
collectability of the buyer, estimating the transaction price, and the use of the output
method to track performance over time. These considerations will help the firm decide
what areas they should focus on. Thus, this can be justified as a key audit matter since
there are multiple procedures needed to analyze the overall performance.

3. Explain the implication of the key audit matter(s) to the overall financial
statement of the company.
The overall amount of revenue a firm generates has an enormous effect on its
profitability. The stated profit or loss may be influenced by any error in revenue
recognition or misrepresentation. Moreover, improper revenue recognition may give rise
to either an overstated or understated assets, liabilities, and equity, which has an impact
on the company's financial condition. As a result, ensuring adequate processes and
procedures has an enormous effect on the company's overall financial statements,
including cash flows, since revenue also influences these. In conclusion, given the size
of the company, the real estate revenue recognition key audit matter is a crucial and
significant component of the financial statements. Nevertheless, it is vital to focus on
what really matters, particularly the accuracy and completeness of the systems used to
recognize revenue.

4. Enumerate what audit procedures should the auditor design to address these
key audit matters and ensure that they will not be materially misstated in the
financial statements.
In order to handle real estate revenue recognition and guarantee that there
cannot be a substantial misstatement in the financial statements, auditors usually
construct a set of audit procedures specific to the risks and nature of the company. The
audit procedures that the auditor should plan are provided below:
  Understand the Nature of the Company – know the nature, operations, and the
system of controls in a company. This includes understanding the revenue
recognition policies of the company.
 Assessment of Internal Controls – examine the internal controls of the
company regarding revenue recognition, which relates to the monitoring and
confirmation of the inflows and outflows of the company.
 Evaluation of Risks – consider the risks associated with real estate revenue
recognition, such as the period for revenue recognition and contract structure.
 Analytical Procedures – undertake analytical procedures to determine whether
the revenue amounts are appropriate. Sample testing, revenue recognition
regulation testing, and fraudulent testing are all included here.
 Verification of Sales – verify the sales transactions to prove the presence of the
contracts.
 Examination of External Evidence – analyze external facts, such as company
reports, to validate the management's claims about revenue recognition.
 Documentation – record every detail of the evidence of the audit procedures
carried out since it is crucial if any issue arises.

References:
https://dlsl.instructure.com/courses/25096/files/7404184?wrap=1
https://ir.ayalaland.com.ph/wp-content/uploads/2016/02/ALI-CG-Manual-05-26-2017.pdf