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Substantive Testing and Cut-offs

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AA Exams › Substantive Testing and Cut-offs

  • This topic has 1 reply, 2 voices, and was last updated 7 years ago by Ken Garrett.
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  • November 10, 2015 at 10:52 pm #281609
    Sleyim
    Member
    • Topics: 6
    • Replies: 7
    • ☆

    I have two questions as follows:

    1) Is re-performing a debtors control account reconciliation a test of control or a substantive test or can it be both?

    2) When looking at cut-offs for goods sold, what indicates a sale has been made, the goods dispatch note or the sales invoice? (For example, if one document is raised pre-year end and the other post-year end, should the sale be based on the goods dispatched note or on the sales invoice?)

    Thank you.

    November 11, 2015 at 8:13 am #281649
    Ken Garrett
    Keymaster
    • Topics: 10
    • Replies: 10197
    • ☆☆☆☆☆

    It can be both.

    If the client does it regularly then this reconciliation is part of their internal controls and if we reperform one of those we are seeing if the reconciliation, ie the control, has been carried out properly.

    For the year-end receivables balance, performing a control account reconciliatin is a substantive test as it give difrec assurance about aspects of teh receivables balance.

    It can get complicated legally, but for you assume that a sale is made when the goods are dispatched – that’s when title passes. An invoice might be raised later, but that is not the date of the sale.

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