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Section B Q18 :
SPIDER SPIRALS :what is a cheque payment run ? i don’t understand what exactly am i supposed to write substantive procedures about ?
A cheque is a written instruction toma bank to pay someone. Cheques are prenumbered documents which all need to be accountrd for. Internet-type credit transfers are now much more common.
A cheque payment is the computer process that prints the cheque (or nowadays creates the credit transfer). The blank cheques are printed with date, amounts and payees’ names (ie the recipiemts of the money).
Tests include ensuring that all cheques are accounted for, that amounts are correct and authorised, and that the payments are for the correct recipients.
so the payment run is done by the company, is that right
The same Q Part d : in the audit report impact answer it says that “Bank OD is overstated as the payments are recorded as coming out of the year end balance” I cant spot such a mention in the question. Can you please help and tell me why did they write that
Yes, cheque run is by the company.
I can’t find Dec 2016 on-line. Is that the right exam?
i suppose it was a cbe exam question
the question goes like this :
The FD of AB Co has informed you that the year end the purchase ledger was kept open for one week longer than normal as a large bank transer and cheque payment run was made on 3 nov 2006 ( 31 oct 2006 is year end) Some purchase invoices were recieved this week and were recorded in the 2006 ledger as weel as payment run made on 3 novemenber.
The FD of AB has now informed you that he is not proposing to make an adjustment for teh trade payables payment run made on 3 nov as teh total payment of $490000 would only require a chnage to trade payables and the bank od , both of which are current liabilities. ( total liabilities is 8.1 m)
the answer states that for the audit report impact : the trade payables which were outstanding at the year end have been understated as they are recorded as being paid ( WHERE IS THIS MENTIONED IN THE Q )
In addition the bank od is overstated as the payments are recorded as coming out of year end bank balance ( where is this mentioned ) i cant get my head around this
It is somewhat badly worded.
The payment on 3/11 has increased the overdraft and decreased payables by 490k. This state of affairs is what is reflected in the FS as this was recorded in the 2006 ledger. Ie, they have taken the figures after this late run into the FS as at 31/10/2006.
It should not have been so recorded.
HTH
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