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Hello Sir,from the examiner report S18,section under planning and risk assessment,one of the extract is:
“Also some candidates suggested the acceptable accounting treatment such as
‘inventory should be valued at the lower of cost and NRV’ as an auditor response. This would have gained
no marks as it is not an approach for the auditor to adopt in auditing the risks”Is it mean if the student writes only the” inventory should valued at lower of cost and NRV” in the auditor response section will gain no mark?
how if the student writes agree a sample of the inventory to the purchase invoice / cost account to the NRV estimated by the management to ensure the inventory valued at lower of cost and NRV also gained no mark?Thank you.Also, the examiner also mentions about the covering letter which reports the applied internal control to management which is worth 2 mark.
What will include in the covering letter and the format? Thank you.The examiner is giving an example of an answer point that “some candidates suggested” (i.e. enough that it came to the examiner’s attention) and explaining why it earned no marks.
“Inventory should be valued at the lower of cost and NRV” is a true statement – but true statements are worthless if they do not answer the question set. In answer to this question, it is clearly NOT an AUDITOR RESPONSE – which must be some ACTION by the auditor. The examiner would be looking for any response directed at determining the extent to which NRV is less than cost for the AFFECTED items of inventory. (Rather than inventory in general.)
You can learn this:
Board of directors/X Co/Address
DateDear Sirs
(Interim/final) Audit of X Co for the year ended [date]
Please find enclosed the report to management on deficiencies in internal controls identified during the audit for the year ended [date]. The appendix to this report considers deficiencies in the *** .
This report only addresses the deficiencies identified during the audit; if further testing had been performed, more deficiencies may have been reported.
This report is solely for the use of management and if you have any further questions, please do not hesitate to contact us.
Yours faithfully
An audit firm*** This should be tailored to the requirements of the question – for example “purchasing system, their implications/consequences and recommendations to address them”.
@kim2311 said:
You can learn this:Board of directors/X Co/Address
DateDear Sirs
(Interim/final) Audit of X Co for the year ended [date]
Please find enclosed the report to management on deficiencies in internal controls identified during the audit for the year ended [date]. The appendix to this report considers deficiencies in the *** .
This report only addresses the deficiencies identified during the audit; if further testing had been performed, more deficiencies may have been reported.
This report is solely for the use of management and if you have any further questions, please do not hesitate to contact us.
Yours faithfully
An audit firm*** This should be tailored to the requirements of the question – for example “purchasing system, their implications/consequences and recommendations to address them”.
The internal control deficiencies that identify in the question is inserted after covering letter at above?and titled ” Internal control deficiencies”? and described it and explain to the management like usual?
Thank you for your format and your help, its useful.
This is the covering letter. The remainder of the letter is set out in 3 columns headed according to the requirement. In CBE a pre-formatted wordprocessing template may include these – whereas in the paper-based the requirement may specify what column headings to use. In any case, they will correspond to the requirements.
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