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Dear tutors,
Please explain for me this audit risk: cut-off of inventory and explain the responding?
Assuming that goods in transit for 2 weaks and conpany correctly record when they receive themCut-off is primarily to do with consistency.
If goods are included in closing inventory, they must have been recorded as a purchase.
If the sale of goods has been recorded in the financial period, then they must not also be in inventory.
I don’t know whether your goods in transit for two weeks are sales or purchases. You certainly have to decide when the sales or purchase is made and to ensure that the accounting is consistent.
Ok let say it is purchase cut-off so that means when the goods leave the port of supplier, we need to have a appropriate entry for it in both payables and purchase/ inventory right?
If we only record when receive the goods and cut-off time is end of the year therefore we are misstating this entry, that is a riskAnother thing i want to ask you mr.Kent
When an auditor identify the risk which is a new inv. System has been introduced in the yr, this could result in inv bal being misstated (why misstated???)
(Is that when starting a new system always need some times to make it run smoothly? And there are some risks come from?)How you treat the delivery depends on the legal position. When are the goods yours? On despatch or on receipt?
Your second point is correct. The main risks are the transfer of the information from the old to the new system (lots of opportunity for mistakes), then staff will be prone to making errors as they become familiar the new system.
I have this one:
” Audit risk:
Existing planes have been refurbished at $ 15 m, this exp should be reviewed whether it is capital exp then including within ppe or expensed as repair exp
Auditor’s response:
Review a breakdown of costs AND AGGREE TO INVOICES (what does “aggree to invoices” mean?) to assess nature of exp …”Can you explain for me this? Thank you in advance
@kengarrett said:
How you treat the delivery depends on the legal position. When are the goods yours? On despatch or on receipt?Your second point is correct. The main risks are the transfer of the information from the old to the new system (lots of opportunity for mistakes), then staff will be prone to making errors as they become familiar the new system.
I think we should treat at a point of time when our liability obligation is occurred as well as goods are ours
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