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scarlet
The company usually pays its suppliers by the end of each month. However, due to the financial accountant’s illness, the payment run for may 20X5 was not performed until 1 june 20X5. The finance director has informed you that in order to show consistent results with the prior year this payment run is shown as an unpresented item on the year end bank reconciliation
For this audit risk is the following auditor’ response correct:
Discuss the accounting treatment with the finance director and ask that the payment run for may 20X5 which was not performed until 1 june 20X5 is removed as an unpresented item on the year end bank reconciliation.
Also this audit risk leads to bank balance being understated so how is it possible evidence of window dressing. If bank balance was overstated then it would be possible evidence of window dressing
You should be able to compare your answers against the published answers to answer for your first point.
Anything that effectively transfers amounts between different line items on the SoFP can be described as window dressing. Bank (asset) is understated but creditors (liability) is understated also. If material, this could affect key ratios.
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