The auditor of Alex Manufacturing Ltd carried out an external confirmation of receivables at year-end to verify the accuracy of the total trade receivables in the statement of financial position at that date.
One of the replies to the confirmations disagreed with the balance.
For the disagreement, select from the options below what impact the disagreement will have for the purposes of evaluating the accuracy of total trade receivables in the statement of financial position at the year end.
- Lucy Trading Ltd disagreed the balance because they had made a payment two days before the year end. The auditor has confirmed that the cheque cleared the bank two days after the year-end.
Select ONE answer:
- Would NOT be considered a misstatement
- Would be considered a misstatement
- Would depend on circumstances
- Would be referred to a senior colleagues
Show your workings to arrive at your answer, and explain and justify your reasons:
……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………
This multiple-choice question is suitable for Accounting KS5 classes.
The answer is 1
- Correct – The disagreement is due to timing differences and hence does not constitute a misstatement in the accuracy of total trade receivables.
- Not correct
- Not correct
- Not correct
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