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Please help me understand if following can fetch me marks for an “Audit procedure question on govt grant received” where the accounting treatment by client is incorrect.
Currently the co. has booked entire 20m as income in current year. There have been no steps taken to meet the conditions attached to the grant.
Inform the management to re-classify the grant as a deferred income in current liability.
Also inform that not doing the required changes would have its impact on the auditors opinion. The required correction is material as it will be changing current profit forecast of 20m to $0.I can’t offer such specific marking guidance as it opens the doors to everyone writing answer points for me to comment on for both AA/AAA and I simply don’t have the time/resources for this.
Please look at the essential marking resources I have sticky posted (“starred”) at the top of this forum e.g. “Read the mind of an AAA marker – ESSENTIAL READING”
What I can say – generally – is that if you have answered the question set, you should recognise your answer points in the model answers. Model answers are very comprehensive and there are few genuinely mark-worthy additional points to be added to them. Touching on the matter of audit opinion, if you can’t be specific in saying what impact then just to say “an impact” is too vague (even in AA) and will earn no marks.
Okay. I understand your point.
So, generally can a point of “Informing the client about misstatement and required changes” be considered as “Audit Procedure”?
I am not asking for any one particular question.
“Informing” is a verb and auditors often do this activity, hence i am assuming it can be a point for audit procedure.
I don’t think it’s a procedure in the sense of “risk assessment procedure” or “substantive procedure”. Clearly it’s something the auditor does (and communicating with a client is a requirement – e.g. ISA 265) but it doesn’t “get” the auditor anything – it doesn’t add to audit evidence. So I think you should take care in your choice of verbs to make sure you are staying within the question requirements and not digressing.
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