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hello mike,,
could you please guide me on the procedures that i have come up with for the question from december ..2011 sitting ..named willow part a (i)
procedures ::
—verify market value (NRV) FOR THE OBSOLETE inventory ,to check if it has any market value in order to continue
—review the purchase invoices of these obsolete inventory to check how long before they were purchased
—-review the documentation of the stock take to verify the amount allocated to these invntory
—-obtain/discuss assessments from mgmt to determine on what assumptions do they believe can be reused ..
……can u please correct me if these are relevant or irrelevant ..any modified phrases ..
thanks for help
Try to avoid the word “check” – the examiner and markers do not like “check”
For all those students in Prague (Praha) the “check” here is not the same as your Czech
“—review the purchase invoices of these obsolete inventory to check how long before they were purchased”
Why? What will you do if those invoices show the inventory was acquired 8 months ago? Or 2 months ago?
“—-review the documentation of the stock take to verify the amount allocated to these invntory”
The documentation from the stock take will not show values! Only quantities are shown on the rough stock sheets (those that were prepared at the time of the stock count)
“—-obtain/discuss assessments from mgmt to determine on what assumptions do they believe can be reused ..
”Ok, but what about looking at transactions subsequent to the year end to see if any obsolete stock has been sold and at what value
What about obtain written representations from management concerning their assertion of values and realisability of this stock
What about determining what active steps are being taken to move this stock and then confirming those steps (adverts, brochures, staff shops)
How many marks was this part of the question worth?
It was five marks ..but there are other requirements ..as well for same issue
The story says that the finance director believes for the inventory ( printing papers) that its not obsolete ..but they will recycle it for further orders …they don’t intent to sell …but the auditor believes that this is obsolete and should b written off
Dear mike
I want to correct my content …that the co business is print supplies ..they use 100 % recycled paper ..I confused this point with that they have printing paper recycling business ..that’s y I did not mention procedures related to selling recycled inventory ….!!i thought they will recycle themselves
Well, there you go! And that shows just how easy it is to answer a completely different question than the one that was asked 😉
Lesson learned I hope
Yeah thanks ..
Reading and understanding the scenario is extremely important
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