[jabbaraslam]

Actually I just want to ask that risk that expenditure may be misclassified between revenue expense (that should be recognised in profit or loss) and capital expense (that should be recognised as an asset in the SoFP and depreciated), Can this be fitted in all that above 3 risks (i.e Sunflower Stores, Milla Cola and Hurling)

And can the response that Review breakdown of costs and agree to invoices to assess nature of expenditure, if capital then agree to inclusion in asset register and if repairs then agree to income statement, be fitted in all that above 3 risks (i.e Sunflower Stores, Milla Cola and Hurling)?

[jabbaraslam]

1) So for all the above 3 risks we can write the same thing which you have mentioned, right?

2) As far as responses are concerned, for all these 3 risks would it be correct to write that Review breakdown of costs and agree to invoices to assess nature of expenditure, if capital then agree to inclusion in asset register and if repairs then agree to income statement?

[jabbaraslam]

So basically for explanation of audit risk I shall write that ” There is a risk that the invoices for the goods is likely to arrive first, and might be processed as though the goods had arrived (Dr Purchases, Cr Supplier).”

And its response would be ” Invoices should not be approved until checks are performed to ensure the goods were ordered and had arrived in good condition.”

Would these be fine and correct?

[jabbaraslam]

What alternative interpretation should I give OR if I do not write this explanation then what explanation shall I write? Can you please suggest?

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