F8AB : Answers for IRC May, 2011

Dear F8 AB Candidates,

I have received encouraging feedback that students were able to sharpen exam skills during the Intensive Revision Class in KL. Please scrutinise answers on "Purpose of Procedures" which is in your Revision Pack page 103.

Work HarDER
Marcus

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Audit procedures – books
SELLING PRICE
Normal Books sales can be determined by Selling price. OBTAIN the Selling price from 2 weeks before and 2 weeks after the year end based on INVOICES or RECEIPTS sent to customers

Purpose of Procedures
Valuation Assertions that if stocks are marketable at prevailing selling price that is higher or lower than costs.


SLOW Moving Books-stock selling price can be determined by COMPARING the discounts given for OTHER similar slow moving stocks.

Purpose of Procedures
Valuation Assertions that stocks are marketable
COST TO COMPLETE production

OBTAIN detailed direct costing like labour, unit costs per book and CALCULATE the total books in production.

Purpose of Procedures
Cut off and Classification assertions that at transactions on calculating costs, relevant direct costs are included only.

COMPARE the WIP books cost incurred so far and with the BUDGET to complete the books to finished products.


Purpose of Procedures
Valuation Assertions that no unusual slow sales arise due to non-salability of books.


COST TO MARKET product
Compare the Marketing Budget over total sales as a percentage to the Marketing Budget or promotion efforts to move slow moving stock.


Purpose of Procedures
Valuation & existence Assertions of slow moving stocks. If there is DEEP discount, indicative that stocks could be lower than costs.