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Hello mike
I was reading exam qs no 2 in DEC/ sept 2016 papers …I attempted this question in exam ..I did that well but now wen I read the examiner answer I came to know that I sort of misinterpreted the info ….the qs is about held for sale assets …according to the info extract it says that :
A manual journal has been posted to reclassify the assets as current ..and adjustment to impairment and reversal of depreciation .the finance director asked the audit senior to check the journal before it was posted on the basis of there being no one with relevant knowledge to do this …
What the last line from finance director interpret ??
What I wrote in exam that finance director has asked the senior to check the entries although they are not being posted yet in the journal so the evidence has actually not been checked by him but later it has been certained that accounting treatment by management is correct ..I wrote that no procedures have been actually conducted in this area except that journal was arithmetically checked ..therefore audit evidence is not sufficient in relation to this area ..so control deficiencies should b reported and auditor must make sure that asset held for sale meet this criteria…
The examiner answer does not include anything related to my interpretation of the scenario ..or no mention of the reasons checking the journal before posting …..
Can u please explain what does finance director mean of such statement
“the finance director asked the audit senior to check the journal before it was posted on the basis of there being no one with relevant knowledge to do this …”
This suggests that the finance director is not looking simply for confirmation of arithmetical accuracy … we’re also looking for integrity – ie this is an appropriate journal entry adjustment to put through the records
“A manual journal has been posted to reclassify the assets as current ..and adjustment to impairment and reversal of depreciation .the finance director asked the audit senior to check the journal before it was posted on the basis of there being no one with relevant knowledge to do this ”
This is confusing and I can only assume that you have mistyped it!
How are these two statements reconciled?
1) “A manual journal has been posted …” and
2) “… to check the journal before it was posted”
Surely you’ve missed the point of the scenario! Isn’t the question asking about whether or not the asset is correctly classified as held for sale?
The bit about the arithmetic accuracy having been checked is there to save you wasting time writing about impairments and depreciation beyond simply stating that these procedures to date clearly represent insufficient audit evidence
I’ve read again what you say that you wrote. It seems to me that what you wrote wanders around the nub of the question but fails seriously to get to grips with the issue
“I wrote that no procedures have been actually conducted in this area except that journal was arithmetically checked ..therefore audit evidence is not sufficient in relation to this area ..so control deficiencies should b reported …”
You also say “… auditor must make sure that asset held for sale meet this criteria … and that’s where the marks are. The identification of how to establish whether or not the assets do (or do not) qualify to be re-classified as held for sale
You need substantially more to fill out that last point of yours
OK?
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