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hi sir as part of the answer they say that is likely to have material level of work in progress being construction work in progress and maintenance services sir how did they know this and how should l leaarn to identify audit risks.Thanks Sir and how does the aged inventory report show that that inventory is to be written down is it by comparin prior inventory valuations
First you need to have studied the topic before attempting Qs. You should also check ACCA’s technical articles for those that might be particularly relevant to the topic you want to practice Qs on. For example, here https://www.accaglobal.com/uk/en/student/exam-support-resources/fundamentals-exams-study-resources/f8/technical-articles.html you will find an article “Answering audit risk questions”.
In relation to this particular Q Prancer Construction Co, the 2nd sentence states “The company specialises in property construction and providing ongoing annual
maintenance services for properties previously constructed”. The first sentence of the meeting notes says “The prior year financial statements recognise work in progress of $1·8m, which was comprised of property construction in progress as well as ongoing maintenance services for finished properties.”An aged inventory report, like an aged debtors/trade receivables report, shows what is “old”/”older”. If old items are unusable (e.g. due to obsolescence) they must be written down to their net realisable value (IAS 2), which may be $0.
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