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Hi sir, for june 2014 exam question 5(a), we are asked for the procedures to undertake in relation to the uncorrected inventory misstatement . The question is only 4 marks.
The answer key shows 7 pointers.
Will i be able to achieve the full 4 marks if i write from the point , ” the misstatement should be compared to materiality … until the last point ?
Because i dont quite understand the first 2 points stated in the answer key.Also, could you explain who are those charged with governance ? Is this the same as management ?
Generally, if there are 4 marks, writing four points (properly explained) will get you 4 marks.
Point 1: Auditors should simply not accept their client’s statement that the inventory problem is not material. There is a problem with some inventory and this point is saying that the auditors have to discover for themselves the extent of the problem by collecting more audit evidence. Sufficient appropriate audit evidence is the foundation of auditing. Directors’ opinions are never great evidence.
Point 2: Simply knowing the cause of the problem might help to decide the extent of the problem.
In a company, those charged with governance are the board of directors.
Okay sir. But the only error in this question is the overstatement of inventory right ? Because in point 6, they said ” request a written representation from the directors about the uncorrected misstatements INCLUDING the inventory errors ”
Point 2 states that ” discuss with the company’s management in order to understand why these inventory differences are occurring ”
What do they mean by inventory differences ?
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