Start of Day 5 Quiz

When using AAA to review the trade creditors ledger, what are the THREE key tests?

• Review for debit balances

• Reconcile ledger to TB

• Identify the most material supplier balances

• Review for related party balances

What tool should you use to auto-populate your post year end payment testing?

• AAA

• Inflo

• LEAP

• Open Banking (Circit)

When testing post year end payments to identify potential unrecorded liabilities, what should be the starting point for your post year end period?

• Average annual creditor days

• Standard supplier credit terms

• Debtor days

Which TWO of the following factors would result in an increase to the post year end period for testing?

• Inquiries with management identified significant unprocessed invoices

• Strong control environment around supplier payments

• The entity tends to pay ahead of its credit terms

• Control weaknesses observed in relation to the process of recording purchase invoices

Answer explanation

We increase the post year end period when there is more risk (because we want to test a larger population.)

Poor controls would make the risk of unrecorded liabilities higher, therefore we would extend the period

What is the threshold range for post year end payment testing?

• 10% - 50% of PM

• 30% - 40% of PM

• 25% - 50% of PM

• 50% - 75% of PM

Within post year end payment testing, we have selected a batch payment.

We have obtained a breakdown of the batch payment, and identified that there are NO individual items above the threshold selected.

What should we do next?

• We should select one item at random

• We should judgementally select a sample of 5 items

• We should select any items above trivial

• We don't need to test any items as no items are above our threshold

What is the purpose of post year end invoice testing?

• To identify payments made post year end that relate to pre year end invoices, and hence should have been accrued for

• To identify invoices recorded post year end that actually relate to pre year end, and hence should have been accrued for

What is the standard post year end period used for post year end invoice testing?

• One week

• One month

• Average creditor days

• Supplier credit terms

What THREE factors may decrease the threshold for selecting post year end invoices from 50% to 40%?

• Minimal purchases

• Unrecorded liabilities identified in the prior year audit

• Significant volumes of low value invoices, that in total, could be material

• Poor control environment identified in relation to creditors

What must we disclose within a directors remuneration disclosure within the financial statements?

• Director emolument amount (£)

• Company contributions to the pension scheme in relation to the directors

• The number of directors who accrued pension benefits

• Highest paid director remuneration