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- This topic has 6 replies, 2 voices, and was last updated 3 years ago by Kim Smith.
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- January 4, 2021 at 2:27 pm #601439
Hello Sir,
The below question is from BPP Revision Kit ,
It starts as below:
You are an audit senior of IBN & Co and you are planning the audit of Mason Air Services Co (Mason) for the year ended 31 December 20X3.
In this the last question is my concern, why isnt the completeness the audit concern.? can you please explain a bit.Thanks in advance π
January 4, 2021 at 4:39 pm #601455I don’t have a BPP kit – so I don’t know what you are asking – completeness of what? Is this an OT question? What are the other options?
January 5, 2021 at 8:16 am #601482I found this in an old edition of the kit – taking each para/sentence in turn:
“Mason also holds around $2 million of aircraft spares which are included within inventory. Mason sells the aircraft spares to amateur flying associations. Aircraft spares which are not sold after three years are scrapped.”
This suggests potentially slow-moving inventory that should be measured at NRV if that is lower than cost – i.e. a valuation assertion at risk.“Approximately a quarter of this value is made up of specialist equipment taken out of aircraft when it was replaced by newer or more advanced equipment.”
i.e. it is not new but used equipment – so of “second-hand” value – again should be measured at NRV.“Such specialist equipment is transferred from non-current assets to inventory without adjustment, and continue to be recognised at amortised (i.e. depreciated) cost.”
When reclassifying assets so that they fall to be accounted for under a different IFRS, measurement (valuation) will be an issue. It should make sense to you that an asset transferred to inventory should be measured at lower of cost and NRV (which is going to be NRV in this case) and not the carrying amount (depreciated cost) per IAS 16.“Which of the following summarises the key audit concern arising from the matter described?”
It shouldn’t be necessary even to contemplate options A-C since all the above points to:
D Accuracy, valuation and allocation of inventoryJanuary 6, 2021 at 12:26 am #601697The passage is same just the question asked is:
In relation to the aircraft spares held by Mason, indicate which of the following correctly describe areas of
audit concern?
Audit concern Not audit concern
Non-current assets
Inventory
Completeness
Accuracy, valuation and allocation
and in this I am asking why completeness isnt an audit concern?January 6, 2021 at 7:36 am #601713The pointers are all towards valuation – I see nothing to suggest any concern regarding completeness – I can’t “invent” a completeness issue when the scenario appears silent on this.
As I indicated, covering up/not looking at the options, I see only valuation (i.e. “accuracy, valuation and allocation”) as a risk area.
What is it that you are interpreting as a concern about completeness?
January 6, 2021 at 4:00 pm #601755I get it now.. I have actually not misunderstood the question, I took the asked question in generalize form rather than specific to the case study…
I get it now Thanks πJanuary 6, 2021 at 5:16 pm #601764That is an important lesson to have learnt early in your studies of AA. You should always be answering an OT question with reference to any given scenario.
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