FR Knowledge Background Flashcards
Are retraining costs included in a restructuring provision?
NO
Is there a risk of receivable not paying?
YES
What is meant by cast?
Get the breakdown and verify it’s accuracy
Are research costs classified as development expenditure in IAS 38?
NO
If NRV < cost? (understated or overstated)
The inventory is overstated
What would management do if they’re discussing a major customer?
Would likely have a board meeting
What document does labour costs relate to?
Payroll records
What document does production overheads or raw materials relate to?
Purchase invoices
If trade-in allowances are lower than carrying amounts of vehicles?
The depreciation policy might not be reasonable
What is aged receivables listing used for?
To identify old or slow-moving balances
An aged report is used to?
Identify old or slow-moving balances
What can an intangible project be?
It can be capitalised or expensed
When is asset recognised?
When it has a probable future economic benefit
What is a proof in total calculation?
Process used to ensure set of records or figures agree with total amount
Trade payables circulisation process?
Sample of suppliers
Send letters to suppliers
Asked to respond directly to auditor
Compare response from suppliers to records
Purchase invoice?
Money company owes to suppliers (AP)
Sales invoice?
Moeny company is owed by customers (AR)
If slow moving inventory?
Should be written down or an allowance is required
When is WIP not relevant?
When all goods are finished
What is meant by valuation of inventory?
Confirming cost of inventory, confirming NRV, write down or allowance is requireqd, reviewing aged inventory report
When generating substantive procedures for trade receivables/payables?
Focuses on SFP balance rather than on purchases or revenue
Difference between redundancy provision and legal claim?
Redundancy provision doesn’t involve a lawyer
When provision is of a one-off nature?
Can’t be comapred to prior year
Does revenue require disclosure notes?
NO
When a loan is for three years?
There is a current and a non-current liability. Therefore split needs to be recalculated and confirmed for correctness
When should written representation procedure only be used?
Where auditor is relying on management’s judgment OR little independent evidence available
What is important for generating substantive procedures for anything bank related?
Whether it is pre or post year
Is analytical procedures and bank balances useful
FUCKING NO
What will an issue of share capital have?
Lots of evidence, no need to rely on management’s judgment
An audit test that emphasises pre or post year in bank rec?
Agree pre-year-end cash book and post-year-end bank statement
What is important for testing in transit items?
What records are tested and whether it’s pre or post eyar end
When procedures over completeness of trade payables and accruals mean?
Must start from outside of accounting records, risk of liabilities omitted from FS
When a provision is an estimate, what will management likely do?
Management may deliberately understate provision as amount is uncertain
When analysing revenue substantive procedures?
Look for documentation to support sales transactions
When analysing share capital substantive procedures?
Double entry used to account for a share issue
When land and buildings have been reviewed during the year (substantive procedures)
Focus on whether relevant accounting standards were followed regarding revaluations
Audit procedures in relation to a specific receivables balance (substantive procedures)
Provide evidence that customer is likely to pay outstanding balance
Valaution of receivables based on (substantive procedures)
Recoverability of debts and whether customers are likely to be paid
What should be best action for research and expenditure (susbtantive procedures)
Relevant accounting standards
What should be best action for going concern (susbtantive procedures)
Afford to pay its liabilities when they fall due
What should be best action for depreciation (susbtantive procedures)
As it’s an estimate, it is up to management judgement
What should be best action for redundancy provision (susbtantive procedures)
Relevant accounting standards
What are examples of analytical procedures?
Comparison of results, trends, proof in totals
What are subsequent events IAS 10?
Events from balance sheet date to when the accounts are signed off
What happens to material adjusted events (IAS 10)?
Adjusted
What happens to material non-adjusted events (IAS 10)?
Disclosed
Is there an active responsibility to search for adjusting events?
YES
Should we obtain written representation from amangement from their knowledge of adjusting events?
YES
When is a contingent asset recognised?
When it is virtually certain
What is meant by allowance for receivable?
The amount of receivable which can’t be recovered
Should posting bank receiipts, updating individual customers and performing bank reconciliations be segragated?
YES
Is GDN or GRN used for receivables?
GDN after year end
Where should overdraft be included in FSs?
In current liabilities
Is GDN or GRN used for payables?
GRN after year end
What must happen to damaged inventory?
Be written down to NRV
Sequence checks satisfyw hich assertion?
COMPLETENESS
What should be done when there’s an increased control/inherent risk?
Increased substantive testing should be done
When should revenue be recognised in IFRS 15? (goods)
Extent that goods will not be returned
How should deposits be recognised?
Until performance obligations have been satisfied
When should revenue and cost of sales be accounted for in IFRS 15 (goods)
Extent that company foresees that the goods will not be returned
How should a refund be initially recognised?
Should be recognised as refund liability
