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Hi, The question 48 Kandinsky (P7 Sep/Dec 15) in BPP book. part a(ii), audit procedure
“Obtain and review management accounts for the period after the reporting date and any interim financial accounts which have been prepared. Perform analytical review to ascertain the trends in profitability and cash flows since the year end.” _extracted from the answer_.
What is the management accounts ? I mean what is the specific statement in management accounts
I think you meant to ask this on the AAA tutor forum? So I’ll answer it here.
If you put “management accounts images” into your browser you should see hundreds of spreadsheets – which is typically how monthly management accounts will be presented – i.e. with months across the top – with a cumulative total for YTD (year to date) and most likely columns for budgets. There will typically be a “p and l” – with more line items than you would expect to see presented in FS down to a before tax profit line – and a “balance sheet” (SoFP) – not in IAS 1 format but with the balances and in the format that is of most interest/use to management. There will most likely be a monthly cash flow to date and FORECAST – not an IAS 7 cash flow statement – because management isn’t interested in cash flows as a reconciliation between balance sheets but to know on a monthly basis what cash is coming in and where it is going.
You should have covered management accounts preparation in Management Accounting and Performance Management.
Regarding Kadinsky, the auditor will likely be interested in the reported monthly revenue, gross profit and operating profit after the reporting date – and cash inflows (e.g. % revenue that is collected within normal credit terms), etc).
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