Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AA Exams › Sep 16
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- March 24, 2019 at 10:44 am #510275
Hello Sir,
for PYQ Sep 2016
Q16 (d)Revenue substantive procedure:
“Select a sample of despatch notes both pre and post year end and follow these through to sales invoices in the correct
accounting period to ensure that cut-off has been correctly applied”why the despatch note is follow through to sales invoice rather than sale order ? the revenue recognised is at the point of sale order or sale invoice raised? how if the sale invoice is raised after the year end but the goods depatch is related to the sales before the year end? how to account the revenue?
Q18(b) auditor response:
“In addition, a written representation should be obtained from
management confirming the basis of any significant
judgements.”
what basis its mean? accounting policy, estimation?Q18 (a) Benefits of audit planning:
“-Assisting, where applicable, in coordination of work done by experts.”I don’t understand what’s means?
Q6
Is it the FS is authorised before the audit report is issued?and if there were amended financial statement for the subsequent event after the audit report is signed, the FS will be required to authorise again before issuing?Q13
why auditor help to selecting the new financial controller which will create self-interest threat for the auditor?what will conflict with the auditor’s interest?as its not senior management.Thank you.
March 25, 2019 at 7:39 am #510349Please can make separate about different questions on different topics.
Q16 (d) Revenue substantive procedure:
This links to s.4 of Chapter 20 and s.2 of Chapter 13. When goods have gone out they will not be inventory but should be included in revenue and receivables. A sales order is not have a double entry – it is the invoice that is recorded (“posted”) – Dr Receivable/Cr Revenue. It is assumed knowledge of FA (F3) that revenue is recognised when the “performance obligation” has been met – for the sale of goods – this is when the goods are transferred to the customer. For a retailer, “at the point of sale” coincides with the invoice (i.e. recording in the till receipt). Even if a company physically raised invoices days after goods have been despatched – the date of sale is when they are no longer in inventory. (The asset of inventory can’t just “disappear” and not be replaced with another asset.)Q18(b) auditor response:
It’s referring to the judgements mentioned in the associated risk – capitalisation policy, provision and allowance (i.e. anything that could significantly affect the bonus).Q18 (a) Benefits of audit planning:
See s.3 of Chapter 23 – using the work of an expert has to be planned for – it isn’t just a random decision during the course of an audit.Q6
See Chapter 26. The FS on which the auditor’s report is issued don’t exist, in law, until they are authorised by the directors. The auditor’s objective – of expressing an opinion – is satisfied when the auditor’s report is issued. If, for any reason, financial statements have to be amended after issue with the auditor’s report, they will have to authorised (again) and the auditor’s report signed (again).Q13
You should regard a financial controller of a listed company as someone senior who would have input into and influence in the preparation of the financial statements – hence a self-interest threat.March 26, 2019 at 12:40 am #510439Q16 but for the question ,the Heraklion Co is manufacturer not a retailer,which the point of sale which should be goods despatch not invoice raised.Or the answer should be select a sample of sale invoice and follow through up to the despatch note to confirm its in the correct accounting period?
Thank you.
March 26, 2019 at 7:27 am #510452Please don’t use the quote function in the tutor forums – it is unnecessary and makes long posts even more unmanageable (I have edited to remove).
I was illustrating a point about revenue recognition. The principle of revenue recognition is that when the seller has performed its obligations under the sales contract – that is the point at which it recognises revenue. So the goods have to have been despatched to the customer (unless the customer has specifically asked for the goods to be held on to).
Please read s.4 of Chapter 20. To test cut-off you take a sample of goods despatched from either side of the year end and agree that the matching sales invoice has been recorded in the correct accounting period. Taking your question “how if the sale invoice is raised after the year end but the goods depatch is related to the sales before the year end? how to account the revenue?” – this is a cut-off error – so it would have to be corrected Dr Receivable/Cr Revenue.
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