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Doubt in Audit risk

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AA Exams › Doubt in Audit risk

  • This topic has 2 replies, 2 voices, and was last updated 7 years ago by Ken Garrett.
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  • May 23, 2018 at 6:59 pm #453638
    niki27
    Member
    • Topics: 82
    • Replies: 15
    • ☆☆

    Dear sir,
    I have a qn, if expenditure is incurred, or there is an increase in subsequent expenditure during the year, the risk is that if they are incorrectly classified ( revenue or capital) they would be overstatement of either profit or say any inventory depending on the classification, am I correct?

    What would be the response to risk for this?

    Thanks

    May 23, 2018 at 7:26 pm #453640
    niki27
    Member
    • Topics: 82
    • Replies: 15
    • ☆☆

    Also, if laws and regulations were to be imposed on a company what would be the response to the risk?

    May 24, 2018 at 10:47 am #453726
    Ken Garrett
    Keymaster
    • Topics: 10
    • Replies: 10589
    • ☆☆☆☆☆

    Make sure the company’s internal controls for ensuring invoices are correctly coded are workingcorrectly.

    Select some invoices at random and see where they have been posted.

    Perform analytical procedures and investigate unusal changes in expenditure.

    For laws and regulations, it is management’s duty to ensure they are followed. Auditors will cover laws relating to the FS as part of their audit (eg tax calculations). Auditors cannot be expected to know other laws and regs that might affect a business, so their responsibility is to be alert for evidence that they might have been broken rather then evidence to confirm the laws have been adhered to.

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