- This topic has 2 replies, 2 voices, and was last updated 9 months ago by
.
- Posts
Good afternoon, Sir.
Sir, Is it possible for the analytical procedures to test certain assertions regarding the individual transactions as well as the account balances. Do we need to state the assertion that is being under test when performing and writing analytical procedures in an exam answer script?Or
Is it only for tests of details that we have to state the assertions that are under scrutiny in an exam answer script?
Moreover, when confirming the existence of payables balance; do we have to consider when we have received the goods whether if it is post- year end or pre-year end to consider recording the purchases and payables in the financial statements. So, Is it like we have to record purchases and payables when goods are received prior to the year end and if the goods are received after the year end, then we have to record it in the next accounting period, right?
Not “individual” transactions but certainly a class of transaction, where the ratio includes transactions (e.g. the efficiency ratios for receivables, payables and inventory holding).
For example – suppose daily sales are $1k, so total revenue is $365k
If customers settle in 30 days, y/e receivables will be $30k
Now suppose there is a cut-off error and the last 5 days’ revenue for the year is not recorded (i.e. also completeness assertion).Total revenue will now be $360k and trade receivables $25k – the collection period is now only 25 days.
So we can conclude that a fall in collection period could be due to omission of sales. If this gave rise to a risk of material misstatement, the auditor would also perform tests of details for the cut-off and completeness assertions.
And yes you are spot on re the payables. If goods are included in the y/e valuation they must be included in purchases for the year (and y/e payables if they haven’t been paid for).
- You must be logged in to reply to this topic.