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Dear Sir,
1,In June 2010,LV Fones (b) what is the meaning of recurring fees and secondment fees.
2,What is the meaning of system documentation?
3,Nrv should always be above cost.Is that right?
4,What is the difference between provision and allowance?
5,In June 2009,Conoy Co.Is there any mistake in the (b) part under the heading Reliance on external auditors.
6.What is the difference between scrap value and Nrv?
Recurring means happening more than once; secondment is the fee for seconding a member of staff to work for the client. Self-interest threats arise if recurring fees form one client >15% of total fees.
System documentation = how the auditor documents, ie records, the client’s internal control system (could also be how the client documents their own system).
NRV can be below cost if an item is unsaleable. Inventory should be valued at the lower of cost and NRV.
Provision = a liability of uncertain timing or amount. An allowance is not the same. The two terms might be used with respect to doubtful debts. An allowance for doubtful debts (ie a write-down) is the proper term.
The June 2009 exam Q4 answer seems badly worded. The audit committee would help both the internal and external auditors to get their points across.
No real difference between scrap and NRV. They are both amounts obtained form the sale of a non-current asset.
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