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Hi
There was an audit risk in dec 15 exam that In October, a fire damaged inventory such that has been written down from $0·9m to $0·2m which is its scrap value. This write down should have been charged to profit or loss.
For its response examiner has mentioned following 2 responses:
Discuss with management the basis of the $0·2m scrap value
attributed.Review whether any of the goods were sold pre or post year end
and at what value; this should assess whether the attributed
scrap value is reasonable. If none have been sold, discuss with
management the possibility of further write downs.My question is that the response that “Discuss with management the basis of the $0·2m scrap value attributed.” Doesn’t it seems to be insufficient for gaining 1 mark?
I am not the examiner but I would encourage students to aim for making the 2nd points rather than the introductory “discuss” points.
Note that the marking scheme says “GENERALLY 1 mark” – so it may well be that the “discuss” points are only 1/2 mark. Please see recent examiner’s reports for further guidance.
Ok. There was an another audit risk in Centipede Co Dec 16, that centipede maintains accounting records at 4 additional sites which were not visited during interim audit and records from these sites are incorporated monthly into general ledger
Here again examiner has mentioned 2 responses that
1)Discuss with management materiality of records maintained at the 4 sites and team should visit some of these sites during final audit to perform testing of records held there
2)CAATs could be utilized by the team to sample test the monthly interface of data from each site to head office to identify any errors
So here would writing the point num 1 be fine for 1 mark, also in point num 1 along with discuss examiner has mentioned to visit some of these sites, so would it be fine for 1 mark?
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