FR Knowledge Background

Question 1

Are retraining costs included in a restructuring provision?

Answer 1

NO

Question 2

Is there a risk of receivable not paying?

Answer 2

YES

Question 3

What is meant by cast?

Answer 3

Get the breakdown and verify it’s accuracy

Question 4

Are research costs classified as development expenditure in IAS 38?

Answer 4

NO

Question 5

If NRV < cost? (understated or overstated)

Answer 5

The inventory is overstated

Question 6

What would management do if they’re discussing a major customer?

Answer 6

Would likely have a board meeting

Question 7

What document does labour costs relate to?

Answer 7

Payroll records

Question 8

What document does production overheads or raw materials relate to?

Answer 8

Purchase invoices

Question 9

If trade-in allowances are lower than carrying amounts of vehicles?

Answer 9

The depreciation policy might not be reasonable

Question 10

What is aged receivables listing used for?

Answer 10

To identify old or slow-moving balances

Question 11

An aged report is used to?

Answer 11

Identify old or slow-moving balances

Question 12

What can an intangible project be?

Answer 12

It can be capitalised or expensed

Question 13

When is asset recognised?

Answer 13

When it has a probable future economic benefit

Question 14

What is a proof in total calculation?

Answer 14

Process used to ensure set of records or figures agree with total amount

Question 15

Trade payables circulisation process?

Answer 15

Sample of suppliers
Send letters to suppliers
Asked to respond directly to auditor
Compare response from suppliers to records

Question 16

Purchase invoice?

Answer 16

Money company owes to suppliers (AP)

Question 17

Sales invoice?

Answer 17

Moeny company is owed by customers (AR)

Question 18

If slow moving inventory?

Answer 18

Should be written down or an allowance is required

Question 19

When is WIP not relevant?

Answer 19

When all goods are finished

Question 20

What is meant by valuation of inventory?

Answer 20

Confirming cost of inventory, confirming NRV, write down or allowance is requireqd, reviewing aged inventory report

Question 21

When generating substantive procedures for trade receivables/payables?

Answer 21

Focuses on SFP balance rather than on purchases or revenue

Question 22

Difference between redundancy provision and legal claim?

Answer 22

Redundancy provision doesn’t involve a lawyer

Question 23

When provision is of a one-off nature?

Answer 23

Can’t be comapred to prior year

Question 24

Does revenue require disclosure notes?

Answer 24

NO

Question 25

When a loan is for three years?

Answer 25

There is a current and a non-current liability. Therefore split needs to be recalculated and confirmed for correctness

Question 26

When should written representation procedure only be used?

Answer 26

Where auditor is relying on management's judgment OR little independent evidence available

Question 27

What is important for generating substantive procedures for anything bank related?

Answer 27

Whether it is pre or post year

Question 28

Is analytical procedures and bank balances useful

Answer 28

FUCKING NO

Question 29

What will an issue of share capital have?

Answer 29

Lots of evidence, no need to rely on management's judgment

Question 30

An audit test that emphasises pre or post year in bank rec?

Answer 30

Agree pre-year-end cash book and post-year-end bank statement

Question 31

What is important for testing in transit items?

Answer 31

What records are tested and whether it's pre or post eyar end

Question 32

When procedures over completeness of trade payables and accruals mean?

Answer 32

Must start from outside of accounting records, risk of liabilities omitted from FS

Question 33

When a provision is an estimate, what will management likely do?

Answer 33

Management may deliberately understate provision as amount is uncertain

Question 34

When analysing revenue substantive procedures?

Answer 34

Look for documentation to support sales transactions

Question 35

When analysing share capital substantive procedures?

Answer 35

Double entry used to account for a share issue

Question 36

When land and buildings have been reviewed during the year (substantive procedures)

Answer 36

Focus on whether relevant accounting standards were followed regarding revaluations

Question 37

Audit procedures in relation to a specific receivables balance (substantive procedures)

Answer 37

Provide evidence that customer is likely to pay outstanding balance

Question 38

Valaution of receivables based on (substantive procedures)

Answer 38

Recoverability of debts and whether customers are likely to be paid

Question 39

What should be best action for research and expenditure (susbtantive procedures)

Answer 39

Relevant accounting standards

Question 40

What should be best action for going concern (susbtantive procedures)

Answer 40

Afford to pay its liabilities when they fall due

Question 41

What should be best action for depreciation (susbtantive procedures)

Answer 41

As it's an estimate, it is up to management judgement

Question 42

What should be best action for redundancy provision (susbtantive procedures)

Answer 42

Relevant accounting standards

Question 43

What are examples of analytical procedures?

Answer 43

Comparison of results, trends, proof in totals

Question 44

What are subsequent events IAS 10?

Answer 44

Events from balance sheet date to when the accounts are signed off

Question 45

What happens to material adjusted events (IAS 10)?

Answer 45

Adjusted

Question 46

What happens to material non-adjusted events (IAS 10)?

Answer 46

Disclosed

Question 47

Is there an active responsibility to search for adjusting events?

Answer 47

YES

Question 48

Should we obtain written representation from amangement from their knowledge of adjusting events?

Answer 48

YES

Question 49

When is a contingent asset recognised?

Answer 49

When it is virtually certain

Question 50

What is meant by allowance for receivable?

Answer 50

The amount of receivable which can't be recovered

Question 51

Should posting bank receiipts, updating individual customers and performing bank reconciliations be segragated?

Answer 51

YES

Question 52

Is GDN or GRN used for receivables?

Answer 52

GDN after year end

Question 53

Where should overdraft be included in FSs?

Answer 53

In current liabilities

Question 54

Is GDN or GRN used for payables?

Answer 54

GRN after year end

Question 55

What must happen to damaged inventory?

Answer 55

Be written down to NRV

Question 56

Sequence checks satisfyw hich assertion?

Answer 56

COMPLETENESS

Question 57

What should be done when there's an increased control/inherent risk?

Answer 57

Increased substantive testing should be done

Question 58

When should revenue be recognised in IFRS 15? (goods)

Answer 58

Extent that goods will not be returned

Question 59

How should deposits be recognised?

Answer 59

Until performance obligations have been satisfied

Question 60

When should revenue and cost of sales be accounted for in IFRS 15 (goods)

Answer 60

Extent that company foresees that the goods will not be returned

Question 61

How should a refund be initially recognised?

Answer 61

Should be recognised as refund liability