Prac exam 1

Question 1

What material misstatements could occur when sales return is being processed?

Answer 1

Sales account –> Occurrence is at risk because customer has returned goods, meaning revenue needs to be derecognised
Sales return account –> if that is completely processed by business to customer

Question 2

What expenses/liabilities are included when making employee redundancy

Answer 2

Payroll expenses –> accuracy, risk of incorrect calculation of redundancy expense

Redundancy liabilities –> completeness, the risk of not accounting for all redundancy to be paid

Question 3

When does assertions and risk of material misstatement apply

Answer 3

Only when an economic event has happened (inflow and outflow of economic resources)

Question 4

When issuing emphasis of matter with unmodified opinion, what are some reasons for EoM?

Answer 4

• going concern uncertainty
• or any other concerns when resolution of a matter is dependent on future actions or events not under direct control of the entity but that may affect the financial report, and the matter is disclosed in the financial report