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I asked question with my tutor who is ACCA qualified and teaching f8 and ICAP audit paper for more than 5 years in ‘Escribir’ which is ACCA approved learning partner located in Karachi, Pakistan.
The question was how can there be overstatement with respect to completeness because my tutor told that there can be either understatement or overstatement with respect to completeness.
The tutor answered e.g if actual sales is £200 and you recorded as £250 then it is overstatement with respect to completeness. Then I told him it should be accuracy problem. He said no, it is not accuracy problem and further elaborate the example. he said let’s suppose the actual amount is £35,308,592 and explain completeness and accuracy problem as follows:
1) The actual amount £35,308,592 is recorded as £35,308,259 it is accuracy problem.
2) The actual amount £35,308,592 is recorded as £35,308,59 it is completeness problem.
But still there remains a question where is overstatement and also I don’t think that above examples the tutor gave is correct Because I think that point 2 is also the case of accuracy.
I want to know that the above examples tutor gave is correct? If not, please explain with examples how can there be overstatement with respect to completeness and please also explain accuracy with examples.
I would be very thankful to you for your help.In terms of P&L items, I would not normally say that there can be an overstatement with respect to completeness. ISA 500 states that completeness is:
“That all transactions and events that should have been recorded have been recorded”.
This implies that there can only be understatement arising from this assertion.
However, there is another one: occurrence. ISA 500 states that occurrence is:
“Transactions and events that have been recorded pertain to the entity and have been recorded”
It seems to me that this is where overstatement might be found.
Accuracy is defined as “Amounts and other data related to recorded transactions and events have been recorded appropriately”.
If something is incomplete, it has not been recorded and cannot be inaccurate. Once you are happy that the list of transactions is complete and the transactions have occurred, then you can move on to the accuracy with which the event has been recorded.
Thank you very much for your immediate help and you make my concept clear. My viewpoint was also that completeness and occurrence have nothing to do with figures, they are just concerned with whether transaction is recorded (in which only understatement can occur) and whether recorded transaction has really taken place (in which only overstatement can occur) respectively. So, I believe they are just opposite to one another.
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