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Hi sir, for june 2011 exam question 3 (b) . In the answer key, for the last audit risk, that relates to making the workforce redundant.
It’s stated in the explanation that this announcement has been made to the staff before the year end, therefore a redundancy provision is required. But there is no such statement in the question. Could you please explain sir ?
The decision to make staff redundant was made before year end so the consequences of that decision should be reflected at year end.
One of the consequences of making staff redundant is that they are entitled to compensation – redundancy payments. That liabiliity exists at year end because the decision giving rise to it was, as I said, taken before year end.
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