Tick and Bash are the auditors of Alex Manufacturing Ltd and have carried out a direct confirmation 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 circularisation disagreed with the balance.
For this disagreement, select whether the disagreement would be considered a misstatement for the purpose of evaluating the accuracy of total trade receivables, not a misstatement, it depends on the size of the business, or one should consult a senior colleague for a final decision
- Lucy Trading Ltd disagreed with the balance because their records indicated that the amount had been paid a few days before the year-end. Tick and Bash’s enquiries revealed that the cheque was cleared shortly after the year-end.
Select ONE answer:
- Misstatement
- Not a misstatement
- Depends on the size of the business
- Consult a senior colleague
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 2
- Not correct
- Correct – this disagreement stems from a timing difference and, as such, does not indicate a misstatement in the receivables balance.
- Not correct
- Not correct
This work is licensed under a Creative Commons Attribution 4.0 International License.
