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
- Arthur Imports plc disagreed with the balance because its records indicated it had paid it two weeks before year-end. The auditor’s enquiries revealed that the amount had been received and credited to another customer’s account before the year-end.
Select ONE answer:
- Misstatement
- Depends on the size of the business
- Not a misstatement
- 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 3
- Not correct
- Not correct
- Correct – this disagreement stems from a mis-posting which does not affect the total receivables balance in the financial statements.
- Not correct
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