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It is mentioned in the subsequent question of Lancaster itself that Agree a sample of additions recorded in the non-current asset register to the cash book and purchase invoice ensuring that the purchase date is accurate and it is recorded at the correct amount tests existence and accuracy. Hence, I had the query.
These are the excerpts
The audit programme includes the following tests to be carried out in relation to additions made during the year:1. Agree a sample of additions recorded in the non-current asset register to the cash book and purchase invoice ensuring that the purchase date is accurate and it is recorded at the correct amount
2. Compare total budgeted additions to actual additions in the year and investigate and corroborate any significant differencesThe correct answer is C.
Tutorial note: Test (1) confirms existence and accuracy and valuation (i.e. at cost). Test (2) is an analytical procedure provides evidence relevant to all the assertions listed except classification. As the comparison is based on totals, this test would not provide evidence relating to classification.
Hi sir,
I read your answers as well as the threads that you had asked me to read. I have three more questions.1. In one of the threads, it is mentioned “For “purchases” one of the procedure to confirm completeness is “for a sample of amounts on the ledger, agree to the computerised payment list to verify the amount and supplier. The purpose is to provide assurance that the payment list is complete and accurate.” (BPP, 150 Westra Co question)”. Again, how does directional testing apply here since it is going backwards but is still testing completeness?
2. If I apply the knowledge i learned from “The starting point is identifying disposals in the asset register and then looking for the disposal proceeds being recorded in the cash book and sales invoice – these would then be traced to the general ledger and financial statements” to the following audit procedure which is “Agree a sample of additions recorded in the non-current asset register to the cash book and purchase invoice ensuring that the purchase date is accurate and it is recorded at the correct amount”, then it almost seems like completeness is being tested; though existence and accuracy is being tested.
3. I think I am making a mistake by just looking at the direction not the account balances or transaction. What do you advise? For instance, in the case of trade payables then completeness is a bigger issue as compared to existence. I maybe going wrong here. What do you suggest so that I find this topic easier.
I got your explanation regarding Point A being concerned with items that do not exist (disposal). Thank you for your detailed explanation.
But I still have four doubts. I have divided it into two parts depending on the option it concerns.
Doubts related to Point A
1. I do not understand how is the direction wrong? It is backwards right? from the financial statements to the source.2. Also, when we say that the direction is wrong, does it mean completeness is being tested?
3. Which assertion is being tested in Point A?
Doubt in Point D
1. Doesn’t impairment concern valuation? How does it link to overstatement (existence) then?Thank you for your explanation dear sir. I got the point that you explained about the ‘if’.
But I have another question if the client doesn’t follow the required ifrs standard then does the matter always become material by nature? I mean for example, if the director borrows even $1 from the company then this is always material by nature, then similarly, does not following ifrs standard properly make the issue material by nature?
Because if not following the IFRS standard makes this a material misstatement for Czech, then it should still be included in answer 4… right? Since this is linked to an uncorrected misstatement. Or is uncorrected misstatement only linked to material misstatements due to quantity?
My primary question would be how should we know that materiality by quantity had to be calculated here?
Oh, I got that audit procedure from ACCA Study hub where they agreed it later to SPL for Gooseberry. I am a little torn at this point, are the audit procedures mentioned in the Study Hub Practice area a good tool to follow?
Also, had a look at the document. Thank you for the rest for information.
Truly appreciate your help.Hello Sir, I will keep in mind to name the topic based on the question next time onwards. I am truly sorry for that.
I still have another question. If i rewrite the same procedures in the exam “Agree the year-end sales tax liability in the trial balance to the tax return/reconciliation submitted to the tax authority and cast the return/reconciliation”. Would that be enough?
Similarly, in Gooseberry question when sufficient and appropriate evidence is asked for research and development expenditure then “agree research expenditure to supporting documentation such as purchase invoices and then to statement of profit or loss” is another audit procedure mentioned. would these audit procedures be considered sufficient to gain the one mark?
Ok sir, got it… so basically it is not a control deficiency and this justifies answer 1. But ideally some checks are required; thereby; justifying answer 2.
Understood. Thank you for your time and explanation.
Exactly, first even i typed 6 in the answer box but it came out as wrong in study hub.
This is the question and answer.
What revenue should be recognised in respect of Contract 1 in Campbell Co’s statement of profit or loss for the year ended 31 December 20X8 (to the nearest $ million?$m
The correct answer is $6.3 m.
Similarly, in another question, In addition to this, there is an outstanding court case at 31 December 20X8 relating to faulty goods supplied by Jeffers Co. Legal advice states that there is a small chance that they will have to pay out $6m, but the most likely outcome is believed to be a payout of $5m. Either way, Jeffers Co will have to pay legal fees of $0.2m. All payments are expected to be made on 31 December 20X9. Jeffers Co has a cost of capital of 10% (discount factor 0.909).
Jeffers Co believes the fault lies with the supplier, and is pursuing a counter-claim. Legal advice states that it is possible, but not likely, that this action will succeed.
Question
3. What amount should be recorded as a provision in respect of the outstanding court case against Jeffers Co as at 31 December 20X8 (to the nearest hundred thousand)?$4700
I typed 4700000 while it prompted that it is wrong answer 4700 is the correct answer.
I am sorry that i typed so much information. My only concern is in the exam i do not want to type the wrong answer in the answer box. So please can you give me some advice as to what the correct responses would be?
If it’s nearest $000 then is $000 taken common?
Please can you give me some tips concerning the answer box and how to understand the most commonly tested requirement concerning the format of the number?
Thank you
Sorry tutor, I used the wrong term. I mean for the answer box Section A and Section B questions. How do I understand what type of answer is required. Is it one decimel space or two since in the answer box for one of the questions, it was answer in the nearest million and the correct answer was 6.3 not 6.30.
My second question concerning answer box is regarding answer to the nearest $’000. When such a requirement is present, then all the answers take 3 zeros common. Hence, if the answer is 143000 then 143 is plugged in. This happens for all questions in study hub except one. my question is if the same requirement is made in the exam, then what should be my answer. should i take three zeros common and answer it is as 143. Please help me out
can you give any general tips concerning answering in the answer box type of questions please?