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Bassett group M/J’18 kaplan kit- part a) i and ii) Operating segments

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AAA Exams › Bassett group M/J’18 kaplan kit- part a) i and ii) Operating segments

  • This topic has 3 replies, 2 voices, and was last updated 1 year ago by Kim Smith.
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  • September 26, 2021 at 2:49 pm #636524
    Noah098
    Member
    • Topics: 935
    • Replies: 352
    • ☆☆☆☆☆

    For instance, the fact that two of the three reported operating segments are showing a drop in performance while the other shows improvement could indicate inaccuracy in the information.

    maam I just don’t get this! I don’t understand why is it seen as “indication of inaccurate information” if one of the operating segments is showing an improvement ? I mean its quite normal for few operating segments in a business to be profitable and rest to be loss making…I don’t see it as a reason for auditor’s to raise their eye brows

    September 27, 2021 at 7:37 am #636548
    Kim Smith
    Keymaster
    • Topics: 100
    • Replies: 6804
    • ☆☆☆☆☆

    If you study business risks and how audit risk/RoMM relate to business risks – Chapter 11 – for revenue/profits/liquidity etc to change is business risk – and the auditor may indeed be able to confirm by obtaining sufficient appropriate audit evidence that the fluctuation is due to a genuine business reason. But it could be due to misstatement – e.g. expenses of one operating segment have been misallocated to another. The auditor should not dismiss the possibility of misstatement merely because there could be a genuine business reason for a change.

    September 27, 2021 at 8:55 am #636569
    Noah098
    Member
    • Topics: 935
    • Replies: 352
    • ☆☆☆☆☆

    oh so you are saying that it is possible that Bassett group may have allocated the expense of academic journal to other OSs and other OSs revenue could have been deliberately/mistakenly been allocated to academic journal to show that it is profitable for any reason…

    September 27, 2021 at 10:38 am #636579
    Kim Smith
    Keymaster
    • Topics: 100
    • Replies: 6804
    • ☆☆☆☆☆

    Yes – I think that is the most obvious possible misstatements that could give rise to the fluctuation.

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