Accruals

Question 1

What is the key assertion?

Answer 1

Completeness.

Question 2

What are the sources of evidence?

Answer 2

• Aged Payables Listing
• Purchase Invoices
• Post Year-End Bank Statements
• Goods Received Notes
• Supplier Statements

Question 3

What can you do with the aged payables listing?

Answer 3

• Obtain the list of accruals from the client, cast it to confirm arithmetical accuracy and agree to the general ledger and the financial statements - completeness, classification.
• Compare the accruals this year to last year to identify any missing items or unusual fluctuation in amount and discuss this with management - completeness & valuation.

Question 4

What can you calculate?

Answer 4

• Recalculate a sample of accrued costs by reference to contracts and payment schedules (e.g. loan interest) - valuation (accuracy of purchases and other expenses).

Question 5

What can you do with purchase invoices?

Answer 5

• Inspect invoices received post year-end to confirm the actual amount and assess whether the accrual is reasonable - valuation.