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Assertions

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AA Exams › Assertions

  • This topic has 6 replies, 3 voices, and was last updated 9 years ago by Mike.
Viewing 7 posts - 1 through 7 (of 7 total)
  • Author
    Posts
  • November 16, 2015 at 12:32 pm #282833
    mansoor
    Participant
    • Topics: 424
    • Replies: 542
    • ☆☆☆☆

    i still cant understand the sentence:

    “risks should be assessed at FS level and Assertion level”

    can u please write a few lines to explain this

    thank you

    November 16, 2015 at 1:39 pm #282847
    Ken Garrett
    Keymaster
    • Topics: 10
    • Replies: 10594
    • ☆☆☆☆☆

    Assertions level: you are looking in detail at the assertions made by each amount in the FS: existence, valuation, compleeness etc.

    Financial statement level: you stand back and look at the FS as a whole to see if they appear to provide a true and fair view.

    November 27, 2015 at 12:18 pm #285685
    Mike
    Participant
    • Topics: 11
    • Replies: 16
    • ☆

    Risk could be assessed by:
    1. Knowledge of the business
    2. Analytical Procedures

    Pls, how does these relate?

    November 27, 2015 at 1:06 pm #285689
    Ken Garrett
    Keymaster
    • Topics: 10
    • Replies: 10594
    • ☆☆☆☆☆

    For example:

    If you knew the business only made cash sales, you should be surprised to see receivables.

    If a consultancy business had lots on inventory, what is it and why?

    If you know the business is an estate agent and property sales are depressed, you should be surprised if revenue increased.

    If a powerful competitor has entered the sector, you should be surprised if GP% increases.

    November 27, 2015 at 1:33 pm #285692
    Mike
    Participant
    • Topics: 11
    • Replies: 16
    • ☆

    Thanks so much!
    So if the examination a question comes up
    “How can risks be assessed?”
    What would be an appropriate answer?

    -FS and Assertion
    Or
    -KOB and analytical procedures.

    Thanks.

    November 27, 2015 at 6:21 pm #285765
    Ken Garrett
    Keymaster
    • Topics: 10
    • Replies: 10594
    • ☆☆☆☆☆

    Assertions do not describe risks.

    Providing a wrong opinion on FS is the what we want to avoid by keeping audit risk low. FS cannot be ignored and analytical procedures are a ways of assessing risk

    Note that the control system also plays a part. If it is good, audit risk is lower.

    November 27, 2015 at 6:41 pm #285773
    Mike
    Participant
    • Topics: 11
    • Replies: 16
    • ☆

    Thanks!!

  • Author
    Posts
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