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I think i’m having a problem where I write a little excessive when it comes to audit risks. Could you please advise me on the following?
“Inventory count will be held on 28 and 29 December with adjustments made for movements to the year end. There is a risk of cut off error of inventory, where inventory received after the count but before the year end may be omitted from year end inventory, resulting in understatement of inventory in the financial statements. Similarly, inventory received after the year end may be included in the year end inventory, resulting in overstatement of inventory in the financial statements”
I took 4 minutes to write the above. Is it okay if I answer it like this (below) instead, without explaining how the adjustments may not be completed accurately?
“Inventory count will be held on 28 and 29 December with adjustments made for movements to the year end. If the adjustments are not completed accurately, the year end inventory in the financial statements may be misstated.”
Also, is it possible to write financial statements in short form as F.S in the exam and perhaps include a statement on the front page of the script saying “Please note that F.S stands for financial statements”?
Hoping to hear from you, thank you.
Example 2 would not attract many marks. All it really say is that if you make wrong adjustments the FS will be wrong. That is obvious.
Use of FS is fine.