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There was time pressure; I did not finish 30% of the paper. However I am happy I got a margin pass of 51% 1st attempt. I did not make for P2 due to same time problems.
How best can I and my other colleagues increase our chances of passing other future sittings as we are challenged by time management.
In any attempt to contribute to ans the question above; here below is my submission:
The other reason for company to be placed under liquidation is that, the company would have experienced problems in meeting its obligations creditors (supplier, banks and other financiers)
In some case, its liabilities will be greater than its assets.
Depending with the jurisdiction, once a company is placed under liquidation, a creditor’s meeting is called to for them to confirm their balances and the liquidator give the report on the assets available.
Coming to issues raise in the question:
a) The claims are made to the company not the liquidator. The liquidator is just standing there in his capacity as a independent trustee for creditors and member to manage the affairs of the companyb) Once it is know that that company is under liquidation, the liquidator’s duty is try to find who the client treat the owed amounts.
i) the whole amount owed may to be recognised if it certain that the the payment will be paid from liquidation proceeds. It is most unlikely due to the reason given above.ii) Normally a portion the the receivable might be certain to be paid. The remainder will be written off.
The most prudent move would be to write off the whole amount subject to what that the auditor would have decided based on the evidence obtained.
c) Normally, confirmations of amount owed to creditors by the liquidator are done through the creditors meeting. Therefore minutes of previous creditors may be the best source of evidence. There are normally public documents filed at Masters of the Court.
d. Depending on the amount from liquidation proceeds (remember assets are now being disposed on forced sale basis, of which some will realise below market value), the liquidator will distribute on pro rata basis to creditors. Their (b) above applies.
e) The role of the auditor is to find the the evidence on the assertions made on the amount concerned. Therefore the substantive tests, it will depend how the management would have reported it and the materiality to financial statements.
Hope it wasn’t too long!!!