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Dear professor, hope you’re doing good!
Here’s a doubt that i have pertains to GC disclosures:
“Review post year?end management accounts to assess if in line with cash flow forecast.”
professor what are management accounts? and why only review post yr-end management accounts, why not pre yr-end?
Because GC is about the future. See page 39 of the notes – if, say, company is operating close to breakeven and close to its overdraft limit, the auditor will want to see a cash flow FORECAST (we’re not talking about a cash flow statement per IAS 7 here) that shows that the company can stay within its overdraft limit. You should know from MA/F2 that a cash flow forecast (“budget”) will show receipts from customers/payments to suppliers etc. These, in turn, will depend on forecasts/budgets of revenue, purchases, etc.
After the reporting date, the company will not produce financial statements for a year (expect plcs that have to produce interim financial statements – but that’s relatively very few companies and not examinable in AA) – but will produce monthly management a/cs. So if the cash flow forecast is based on achieving monthly revenue of $100,000, the auditor would want to see that the management a/cs for March (say) show that in January, February, March, monthly revenue achieved was in the region of $100,000.
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