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Sir there is an audit risk in a scenario that company value its inventory at lower of cost and NRV. Cost includes both production and general overheads
For its response the examiner has written that:
Discuss with management the nature of the overheads included in inventory valuation. If general overheads are included, request management remove them from the valuation to be included in draft financial statements
Review supporting documentation to ensure those overheads deemed to be of a production nature are valid
Here I just want to ask 1 question that the above are 2 responses na? Its not just 1 response na? And in exam if we are required to write 1 response for each audit risk so we can write any 1 from these 2 na?
Yes you need only 1 good answer point to earn a mark. As you will see if you look at the marking schemes also – the published answer often includes additional answer points – especially where there is a range of equally valid points that could be made.
Sir likewise there was audit risk that The directors have reviewed the asset lives and depreciation rates of plant and machinery, resulting in the depreciation charge reducing.
For its response examiner mentioned that:
Discuss with the directors the rationale for any extensions of
asset lives and reduction of depreciation rates.The revised useful life of a sample of assets should be compared
to how often these assets are replaced, as this provides
evidence of the useful life of assets.Please confirm me 1 thing discuss with directors the rationale….. is a 1 full response na?
And Revised useful life of a sample…. is another full response na?These both are 2 separate and different responses na? And I should be writing any 1 from these 2 na?
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