- This topic has 1 reply, 2 voices, and was last updated 4 years ago by
.
- Posts
For questions of preliminary analytical review and audit risk, I can never finish on time. With the mark allocation provided, 2 marks for profitability, 2 marks for liquidity and 2 marks for solvency, could you please explain how can I limit my writing to finish on time?
For liquidity, I am explaining current ratio, inventory holding period, receivables collection period and payables payment period.
How can I limit my answer and ratios calculation t finish on time? They give 6 marks for ratio (inclusive of 1/2 marks for trend and 1 mark each ratio) but we always need to calculate more than six.
I suggest you read the examiner’s report for September 2018.
You should not be tackling an audit risk Q with a preconceived idea that you are going to calculate and explain 4 liquidity ratios:
– there’s no point calculating what is immaterial (e.g. inventory days for a business that holds no inventory, or receivables days for a retail business)
– if you calculate something and it has barely changed, if at all, does it identify a risk? Probably not – so ignore it and explain those risks that are identified by the ratios.Analytical procedures at the planning stage are a “risk assessment procedure” – if a ratio suggests no risk it will be irrelevant.
- You must be logged in to reply to this topic.