Lucy, an audit senior, has obtained a list of items which make up the cash and cash equivalents balance (£3,556) in the financial statements of Alex Manufacturing Ltd.
Materiality has been set at £4,000.
For the item below, select whether Lucy should test or should NOT test the item, or whether they should consult a senior colleague or a junior colleague.
- Special directors’ cash account £1,294
Select ONE answer:
- Consult a senior colleague
- Consult a junior colleague
- Test
- Not Test
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 3
- Not correct
- Not correct
- Correct – The special directors’ cash account should be tested whatever its monetary value. Strict materiality thresholds do not apply to directors’ emoluments which need to be disclosed whatever their amount. In any case the auditor needs to ascertain what this balance represents.
- Not correct
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