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current yr budgets and management accounts

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AA Exams › current yr budgets and management accounts

  • This topic has 1 reply, 2 voices, and was last updated 3 years ago by Kim Smith.
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  • August 5, 2021 at 3:22 am #630423
    Noah098
    Member
    • Topics: 935
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    • ☆☆☆☆☆

    Current year budgets and management accounts: Provides relevant financial information for the year to date. It will help the auditor during the planning stage for preliminary analytical review and risk identification.

    maam can you explain with example how

    1. Current yr budgets will help during planning stage in PRELIMINARY ANALYTICAL REVIEW AND RISK IDENTIFICATION

    2. management accounts will help during planning stage in PRELIMINARY ANALYTICAL REVIEW AND RISK IDENTIFICATION

    sorry for bothering you with a barrage of questions

    August 5, 2021 at 7:31 am #630439
    Kim Smith
    Keymaster
    • Topics: 135
    • Replies: 8309
    • ☆☆☆☆☆

    You should know from MA/F2 that budgets are prepared in advance – management accounts, like financial accounts, are prepared “after the fact” (historic).

    So the budget for 20X1 prepared in 20X0 will reflect expectations/management’s plans for the year ahead (20X1).

    The management a/cs prepared at each month/quarter end are then a reflection of actual performance (that management would compare to budgets – and standards if using variance analysis).

    Both provide the auditor with information for understanding the entity that could have implications for risk – e.g. if budgeted revenue for the year is $1.2m (i.e. averaging $0.1m per month) but the management a/cs for the first 6 months of the year show revenue of only $0.5m perhaps there is an increased risk of revenue overstatement.

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