Big4Guy

AS2 requires auditors to identify significant processes and major classes of transactions affecting significant accounts. Transactions which are significant to a company's financial statements are termed as 'Major Class of Transaction'. To take an example, purchases of raw material at a manufacturing company which constitute 80% in vaalue of the finished product can be included under major classes of transactions. Major Classes of Transactions can be classified into three groups namely routine transactions, Non-routine transactions and Estimation transactions. Each of these types of transactions have different levels of risk associated with it. Here's what I could understand of the transaction types mentioned above.

Routine Transactions - These are recurring transactions such as sales, purchases etc which reflect in financial statements.

Non-Routine Transactions - Non-Routine transactions do not form part of the routine flow of transactions. Such transactions occur periodically. Examples could include stock taking, inventory counts etc.

Estimation Transactions - Transactions for which there is no precise means of measurement under financial accounting are covered under estimation. They involve a lot of management judegements and assumptions.

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