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- February 16, 2019 at 11:34 am #505291
I am doing revision mock test of AA on OT,
there is a question of Hood company which says
TOC reveals that there is a often delay between hood company deliver of goods and subsequent raising of invoice.
Complete the sentence below
:
The auditor should compare GDN before year end with sales ledger.
why is that?February 16, 2019 at 11:59 am #505292The risk of one of cut-off error – that goods go out (i.e. not in inventory so increases cost of sales) but there is no corresponding revenue/receivable. It’s not enough to check that there is a sales invoice because that’s not enough to know whether it’s been recorded. If included in the sales ledger, the sale (and hence the receivable) will have been recorded.
February 16, 2019 at 12:23 pm #505301Thanks.
A receivables balance is recorded in the clients book as $2885 Dr but the customer reply to the confirmation is $2635 is owed by him,
Options
1.The customer had paid $ 250 on the last day of accounting period
2.The clients record are inaccurate
3.An invoice of $250 has been sent t o the customer by posy
4.the amount of $250 invoice has been raised the day after the accounting period.
Option 4 is correct , why not option 1 and 3?February 16, 2019 at 12:30 pm #505307the question for above query is:
Which of the following is not account for the discrepancy?February 16, 2019 at 12:54 pm #505318Sorry, one more question about receivables:
Tracing shipping documents, is it completeness or existence?February 16, 2019 at 2:07 pm #505330The question was which could NOT account for discrepancy? So 1, 2 & 3 could all be reasons why the balance is $250 more in the client’s books than in the customer’s books. 4 could not account for the discrepancy because $250 would not have been recorded in the client’s books at the y/e date.
See the chapter financial statement assertions revisited – completeness is relevant to both classes of transactions and account balances – but only an asset/liability (account balance) is held out to exist (at the reporting date. Tracing any transaction from its source to ensure its inclusion in the financial statements is a test of completeness.
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