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- November 28, 2019 at 2:17 pm #554030
Hello Tutor,
Could you please help with Substantive procedures for the following items in the SFP and SPL with the assertions being tested, if there are any:
1. Allowance for receivables, Irrecoverable debt and other provisions
2. Tax expense (SPL), Deferred tax and Tax payable (SFP)
3. Intangible Non-Current Assets and Financial assets
4. Equity
5. Finance cost and Investment IncomeI am not sure if there are any procedures for some items in the financial statements, so thought to ask in case i’m unaware.
Thanks!!
November 28, 2019 at 2:36 pm #5540311. Allowance for receivables (and related bad debt expense) is related to assertions about receivables – in particular valuation. Receivables will be overstated if the allowance is understated – look at the section “other work on receivables” (page 86) for tests which might point to the need for an allowance to be made
2. Tax is not mentioned in the AA and IAS 12 is not assumed knowledge (only the accounting standards that are examinable in FA/F3 – but not the group-related standards because group audits are not examinable in AA). The only tax liability you might encounter is a payroll-related tax accrual (see Q16(c) of M/J19 exam)
3. Procedures for intangibles are not hugely different to PPE – attempt Q18 from the M/J18 exam as examples of both and use the article “starred” at the top of this forum called “How to score marks in AA – essential guidance” to mark your answer. Financial instruments are examinable only from FR so not examinable in AA (except for trade receivables of course).
4. There’s not much to be said about share capital – you should be able to think of some basic procedures e.g. agree opening balances to PY – confirm receipt of cash for issued capital to bank statement – agree calculation of premium and separate allocation/disclosure of premium etc
5. Also relatively little to write about these are most likely would not be sufficiently material to merit more than analytical procedures (e.g. a “proof in total” or “reasonableness test” – e.g. average bank overdraft during the year x average rate of interest – or calculated on a monthly basis)November 29, 2019 at 7:14 am #554099Thank you for the detailed explanation!!
November 29, 2019 at 7:30 am #554102You’re welcome!
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