00:13] gromit : So - who wants to start?
00:15] srah1 : hi
00:23] gromit : I'm the tutor
00:30] baluacca : should i?
00:34] gromit : sure
00:55] baluacca : ok difference between sales ledger and acc receivables ledger,
r they same?
01:29] gromit : yes - sales ledger, accounts receivable, receivables and debtors
are the same
01:48] baluacca : ok that was confusing in textbook
01:52] gromit : Receivables probable the best name
01:54] baluacca : thnx
02:14] gromit : same with accounts payable, creditors and payables
02:24] baluacca : got it
02:31] julia_zyc : are cash sales just recorded in cash book?
03:02] gromit : Eventually. Would normallt be rung up first on the till, then Dr
Cash, Cr Sales
03:15] gromit : No receivables involved
03:17] baluacca : what about cash memo?
03:40] baluacca : {julia_zyc} ;)
03:44] julia_zyc : i c
03:57] gromit : I wouldnt't worry too much about that - the DR can be a specific
column in the cash book
04:57] baluacca : have u heared about fair presentation framework and
compliance framework, i have read the r used in business entity nad not for
profit organisation reporting respectively
05:10] srah1 : can u plz tell me the sequence of entering a trans.frm source doc
2 f/s?
05:11] gromit : Of course, with cash sales you need to worry about ensuring
that the cash receipts are safely recorded - cash is an attractive asset!
05:17] srah1 : plz
05:55] gromit : Which sort of transaction?
06:20] srah1 : credit sales for example
06:42] gromit : OK. First the order receipt must be captured and recorded
06:51] gromit : That must progress to a despatch
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06:52] srah1 : okak
06:57] srah1 : okay
07:02] gromit : After despatch there has to be an invoice
07:15] gromit : It's only then that double entry happens
07:26] gromit : Dr Receivable, Cr Sales
07:44] gromit : To ensure that all invoices get into the reeivables ledger
07:54] srah1 : so after da goods r dispatched..the credit sale is recorded?
07:57] gromit : a sales day book can be used - just a list of invoices
08:15] gromit : Well, arounf the time the goods are despatched
08:25] baluacca : in which case do we have credit balances (negative balances)
on acc receivable ledger?
08:40] gromit : That's where cut-pff becomes important - to ensure consistency
between despatch, inventory and sales
09:05] gromit : {baluacca} {baluacca} Not sure what you mean
09:31] gromit : The despatch of goods is not recorced in the double entry
system
09:39] klusener : one control objective is to ensure purchase orders are
accurately recorded by suppliers, how does it reduces misstatements if goods
recieved are checked with orders??
09:53] baluacca : it is in case of selection for the sample we should pay an
attention on credit or negative balances on acc receivable ledger
10:21] gromit : Well, they are unusual? Think how they could happen...
10:46] gromit : Perhaps we record the Dr to the wrong cuctomer then when we
get the cash, we credit the correst one
10:49] baluacca : if customer has paid in advance, what then?
10:56] srah1 : during checkin cut off of sales...what do the auditor xactly check?
11:13] gromit : If they pay in advance, that would be another, more legitimate,
reason for a CR balance
11:23] baluacca : ok ic
11:43] gromit : Cut-off is primarily to do with condidtency
11:50] angus : yea but normally customers are given credit periods
11:58] gromit : If goods are despatched they will not be in tear end inventory
12:13] gromit : Therefore they should be in sales and receivables (assuming not
paid for)
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12:29] gromit : If they are in year-end inventory, they cannot also be in sales
and receivables
12:53] gromit : Not condidtency, consistency!
12:56] angus : yea , but there is an exception i think .......sale or return basis
13:26] gromit : Not really - SOR goods are inventory in someone else's
premises
13:38] gromit : They are in inventory until sold
13:50] angus : ok but they will not be in our inventory correct?
14:04] angus : but still we need to record in our inventory right?
14:16] gromit : Yes they will be because they are not sold to our customer until
our customery selld them on
14:35] baluacca : u r talking about consignment inventory rt?
14:45] angus : sale or return basis
15:13] angus : the goods are not physically in ur warehouse , but still needs to
be recorded as closing inventory
15:16] gromit : I think so - don't often come across assignment inventory
15:32] gromit : {Angus} Correst
15:36] gromit : correct
15:40] baluacca : ok
15:45] angus : ok thank u
15:50] gromit : No probs
16:01] srah1 : ok thnx
16:20] baluacca : what kind of assurance provide internal audit for
management?
16:46] gromit : IA gain great expertise in the company's internal control system
17:02] gromit : They can spend long periods designing ang checking its
operation
17:17] baluacca : is it higher assurance than external auditor, i.e. reasonable
one rt?
17:19] gromit : They can also be asked to partake in special investigations such as into a fraud
17:35] klusener : In marking scheme by examiner where we are asked to give
audit procedures for purchase system the points such as reviewing reconciliation
of supplier statement, inspecting paid invoices to be stamped to avoid double
payment, are not given so are these points relevant?
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17:41] baluacca : :yes:
17:47] gromit : Higher because of their expertise, but lower because they can't
be quite as independent
18:13] angus : yes their assurance wud be dependent on the auditors
judgement
18:14] baluacca : {Gromit} ic thnx
18:18] gromit : {klusener} Those points are very relevant
18:51] baluacca : what kind of document is supplier's statement is it delivery
note, what els?
19:01] gromit : {Angus} Internal Auditors are in a better positin if they report
to an audit committee rather than the Finance Director
19:45] angus : oh i see ............ so the finance director is not part of the audit
committee then
19:57] gromit : A supplier's statement is a printout of your suppliers caccount
eith you - taken from the supplier's receivables ledger
20:24] gromit : TH FD might be, but the AC is (or should be dominated) by
NEDs
20:40] baluacca : I don't understand what u mean
20:55] klusener : I m still confused as how if purchase orders are accurately
recorded by suppliers wud ensure reduced misstatements??
21:11] gromit : A suppliers statement will show the invoices the supplier has
sent to you and the cash you have paid to him
21:30] baluacca : {Gromit} ok, purchase invoice then
21:36] gromit : It's the supplier's view of your Dr/Cr relationship and should
match yours - apart form timing differences
21:39] baluacca : not delivery note
21:59] gromit : Not delivery note - that is not a double entry document
22:00] angus : {klusener} if ur suppliers have accurately recorded their
dealings with u , then u as an auditor can contact them , get there account
figures and compare it with the figures given to u by management
22:33] gromit : Correst - but if they send your client sdtatements anyhow, the
auditor won't need to contact them
23:07] baluacca : therefore circularisation is not wide spread in case of
purchases
23:10] baluacca : rt?
23:23] angus : circulisation?
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23:36] gromit : Certainly not in the UK, but it seems to be more common in
other countries - not sure why. Probably habit
23:38] angus : circularisation ............. ive never heard that term before
23:53] baluacca : {Angus} direct confirmation from custommers
23:58] angus : oh i see
24:00] srah1 : but payables circularisations r done quite often right?
24:08] gromit : A circularisation is when you write to customer/suppliers asking
them to confirm balances
24:33] gromit : Receivables circularisations (to customer/debtors) are very
common
24:49] gromit : Payables circularisation, not so common
25:01] gromit : because suppiers usually send statements anuyhow
25:22] srah1 : oh ok
25:23] klusener : control objectiive of ensuring goods are recieved for orders
made helps to confirm occurance assertion. correct?
25:33] baluacca : guys, may be it would be better if we ask the tutor
consistently, otherwise it is mess here
26:22] gromit : {klusener} If you can see a signed delivery note, it gives you
confidence that the sale really occured
27:05] gromit : Also, you don't want sales orders to go astray - you want them
to progress theough despatch, invoice and cash receipt
27:48] angus : yea and each with be referenced with its serial numbers which
shud be in sequence
27:57] angus : making it easy to cross reference
28:02] angus : in times of audit
28:13] gromit : Serial numbers are great for completeness etc
28:25] angus : k
28:44] gromit : Really, you want to be able to trace all transactions both ways
eg
28:53] baluacca : what is difference between control objective and audit
objective of performing test of control?
29:12] gromit : from a sales order to to cahs being received, and from an entry
in the DR of the cash book, back to a sales order
29:37] longmao : can i ask a qn here?
30:05] gromit : A control objective is a high-level concept - like how do we
ensure that supplier invoices are not paid twice
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30:27] gromit : To prevent that there must be a control (like cancelling the
invoice when paid)
30:30] esenia : Hi sorry just have birthday day today so couln not come earlier.
hat the theme of discussion?
30:47] gromit : The audit objective could be to ensure that invoices are
consistently cancelled when paid
30:52] angus : Hmmm so control objective is simply the task a control is trying
to achieve
30:59] gromit : That's it
31:09] gromit : {longmao} sure
31:12] baluacca : ok
32:02] gromit : So how's the studying going?
32:06] angus : hmmm
32:10] gromit : All ready for December?
32:17] angus : well im jus revising
32:26] angus : and trying to absorb everything i can :)
32:28] klusener : control procedures and substantive procedures are sometimes
same so is it correct to say that real difference between them is why the
procedure is performed?
32:30] gromit : Good - how
32:31] baluacca : not yet, we have one month
32:46] longmao : {Gromit} thks. can i ask what are the main topics that we
must know /study?
33:01] angus : reading reading reading .....
33:11] baluacca : {longmao} don't learn selective, it is bad practice
33:26] florb : Hello Gromit
33:40] kingnasha : {Gromit} How would u advice to utilise the month left
before exams? read da text or do past papers or???
33:42] gromit : {Angus} Be sure to look at question - all that matters
eventually is responding to the questions asked
33:56] gromit : Pat papers
34:02] gromit : Past papers
34:07] baluacca : {Gromit} :yes:
34:15] srah1 : can i ask a qs ?
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34:17] florb : could you explain the relationship between audit materiality and
tolerable error?
34:19] angus : yea , thanks Grommit , i mainly focus on that
34:25] gromit : If there is something new in those, themn use that to go to your
text book
34:32] kingnasha : {Gromit} and should we do da past paers frm da old
scheme??
34:34] sk1989 : what is the main reason for the low pass rate?
34:44] sk1989 : students dont understand the question asked?
34:46] srah1 : during final review stage ..u is A.P.important again?
34:53] gromit : {kingnasha} Past sheme questions are fine
35:11] srah1 : y is AP done again?
35:21] angus : wait guys
35:37] gromit : {sk1989} They don't properly address the question asked. I say
you should have a VeSTeD interest in doing questions, meaning
35:39] angus : first question was audit materiality and tolerable error
35:50] srah1 : ok
36:07] gromit : Verb - look at what it askes you do do - list, describe, explaine OFten there are two verbs in one question
36:23] baluacca : like contrast and compare?
36:23] gromit : S = scenario - always tune your answer to what's in the
scenario
36:29] angus : yea its all given at the beginnign of the bpp exam kit
36:43] baluacca : list and explain
36:44] gromit : T = Time = fill the time up writing 1.8 minutes/mark
36:54] baluacca : and so on
37:17] gromit : D = Detail - pretend you are explaing things to a 16 year old kid
on work experience. Dont's use the word 'check' - it's too general
37:50] klusener : control procedures and substantive procedures are sometimes
same so is it correct to say that real difference between them is why the
procedure is performed?
37:56] gromit : INstead of 'check, try - reperform, agree ,compare, count,
match etc
38:10] baluacca : foot?
38:19] gromit : {klusener} I don't thnik they are often the same
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38:30] sk1989 : {Gromit} i have found most of the questions to be focused
towards using ur common sense and applying the concepts u have learned
throughout our ACCA studies.... meaning F8 is not strictly restricted towards the
text. general concepts also apply. is this a valid observation?
39:06] gromit : A control procedure is what the client does to control stuff (like
authorising overtime) A substantive procedure is what the auditor does to try to
ensure there are no material errors in the FS
39:49] srah1 : and test of details plz?
40:04] gromit : F8 is very application orientated so common sense on how to
approach a unique client (as set out in the scenario) must be used
40:20] gromit : {srah1} ?
40:24] florb : {Gromit}: could you explain the relationship between audit
materiality and tolerable error?
40:52] srah1 : what about "test of details"?
41:07] determined : plz test of details thant u
41:08] gromit : {srah1} I don't know what that is
41:09] baluacca : {srah1} what about with it be a bit specific pls
41:28] angus : i know test of details
41:58] angus : u have to conduct test of details , if u (the auditor) are not
satisfied with the test of controls
42:07] srah1 : Sp includes testing details and analytical procedure right?
42:10] florb : maybe what is the difference between test of details and
substantive procedure?
42:20] gromit : {florb} Tolerable error is to so with sampling. It's unlikelt that
not all transaction chosen in the sample will be perfect, so you need to have an
idea about when to abandon reliance on that control operating
43:17] angus : Tolerable error is simply the maximum error an auditor is willing
to accept
43:19] gromit : I think by 'test of details' you mean 'substantive procedures' I
have never heard the former term
43:33] gromit : {Angus} Correct
43:34] sk1989 : {Gromit} yes, thats what he means
43:43] srah1 : i got that term in Kaplan text
44:01] angus : yes there is a term test of details
44:05] gromit : OK, I would not use the term 'test of details' - do you mean
'detailed testing'?
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44:15] baluacca : test of details is one type of AP
44:21] sk1989 : {Gromit} it says so in one of the text book
44:29] sk1989 : i am not sure which one
44:45] baluacca : and second is AP i.e. substantive analytical procedures
44:46] sk1989 : but the term is i think used interchangeably with substantive
testing
45:05] baluacca : where is prob here
45:06] gromit : detailed testing = substantive testing
45:23] srah1 : yes..infts..theres a chart showing Subs procedure includes "test
of details and "Analytical procedure"
45:38] srah1 : in FTC book
45:45] srah1 : oh ok
45:55] baluacca : {Gromit} difference between hapazard and judgemental
selection
45:59] ryzalahmad : new term for me-test of details
46:05] sk1989 : which topic has been the examiners favourite over these past
few attempts?
46:13] klusener : In mark scheme one procedure for purchase system is given
as "for sample of purchase invoices agree details to individual payable account"
this same procedure is given where we need to provide substantive procedures
for purchases. here they r same
46:15] gromit : I've just look ed at the BPP text.
46:42] sk1989 : or more appropriately, which topic has been more in focus in
real life situations?
46:49] srah1 : {sk1989} dont try 2 judge that..u'
47:00] gromit : It says substantive procedures are audit procedures designed to
detect material misstatements at the assertion level
47:03] srah1 : cant predict the qs paper..
47:08] sk1989 : {srah1} not focusing on tips :)
47:36] gromit : They consist of tests of details of classes of transactions,
accounts balances and disclosures and substantive analytical procedures
47:50] baluacca : {Gromit} :yes:
48:12] gromit : So 'test of details' might be a shorthand, but I really do think
the term 'substantive tests' is better
48:19] srah1 : yes...there was my point
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48:27] srah1 : thnx
48:34] gromit : HTH
48:34] baluacca : {Gromit} got it thnx
48:35] angus : yes test of details is a part of sub tests
48:58] gromit : but you would have to specify what details, I thnik!
49:07] gromit : think
49:08] baluacca : difference between hapazard and judgemental selection
49:17] gromit : Very little
49:20] klusener : In mark scheme one procedure for purchase system is given
as "for sample of purchase invoices agree details to individual payable account"
this same procedure is given where we need to provide substantive procedures
for purchases. here they r same
49:32] baluacca : I have guessed so
49:39] florb : {Gromit} ok. so basically the tolerable eror has to do with the
reliance on internal controls. Why then the tolerable error is defined as a % from
materiality level?
50:23] baluacca : {florb} it is in substantive testing also
50:31] baluacca : therefore %
50:44] julia_zyc : {baluacca} what's hapazard and judgemental selection?
Where is it in the book?
51:04] baluacca : in bpp and G T G
51:13] florb : what is GTG?
51:17] florb : G T G
51:24] sk1989 : its another textbook for ACCA
51:36] gromit : {klusener} That is a little bit surprising
52:13] julia_zyc : {baluacca} found it, it's sampling selection, i forgot that
52:17] gromit : If you are testing a system, you should be testing controls, so
tracing say 10 invoices to a payables account isn't really testing a control
52:54] baluacca : tracing and vouching are substantive tests are they?
53:12] angus : so tracing invoices is an analytical procedure?
53:19] gromit : I think the examiner gets it wrong sometimes :o
53:30] gromit : {baluacca} yes
53:37] baluacca : {Angus} :no:
53:41] gromit : vouching is quite an old term now
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53:43] sk1989 : {Gromit} haha, he is after all but a human
53:47] julia_zyc : {baluacca} i did a past question, tracing and vouching are
used for tests control as well
53:52] angus : lol analytical procedure is part of su testing
53:53] sk1989 : i like the thought of examiner being wrong :P
53:56] angus : sub
54:05] srah1 : can tracing n vouching b used interchangeably?
54:21] srah1 : {Gromit}
54:26] angus : no u cant
54:33] baluacca : {Angus} they r tests of secondary importance AP are very
important at reisk assessment stages
55:07] angus : but Ap is a substantive test
55:11] srah1 : y not/
55:19] srah1 : {Angus}
55:28] angus : tracing is tracking
55:37] gromit : 5 minutes left....
55:52] gromit : {Angus} that's it
56:08] angus : vouching ....... one sec :D
56:09] baluacca : {Angus} yeah, but SAP does not detect any misstatement
56:14] gromit : To me vouching implies high volume work
56:44] ryzalahmad : referring to graham cosserat article, vouching is from
record to supporting doc.
56:49] angus : baluacca ill get back to u
56:51] gromit : {baluacca} SAP?
56:57] srah1 : {Gromit} thers also 1 thing called.."Stratification"...in
samping..where hapazard n judgemental selection explain...can u xplain that
too..
57:02] angus : sub ana proc
57:03] baluacca : SAP is merely guidence for auditor that unusual relationship
exists and audito should more extensively test part audit area
57:13] ryzalahmad : tracing is reverse of vouching
57:17] baluacca : {Gromit} substantive analytical procedures
57:29] gromit : {ryzalahmad} That is correct, but there's no point in doing that
on a low volume basis if there are no controls present
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57:59] ryzalahmad : [gromit} :yes:
58:01] gromit : I don't think you need to get into the semantics of tracing/
vouching
58:01] angus : well i think vouching means to provide evidence
58:35] gromit : {Angus} It's one way of providing evidence
59:21] baluacca : tracing and vouching will be used if we test ommission or
misstatement rt?
59:22] gromit : Well, hope you found this of some use
59:28] gromit : Want to do it again some time?
59:35] srah1 : yes
59:38] baluacca : it was great
59:45] baluacca : of course if u have time
59:48] premila : yes plese
59:52] sk1989 : {Gromit} yes :)
1:00:01] angus : voucing shud be used for ommision
1:00:11] gromit : OK. We will arrange another session before too long
1:00:12] baluacca : {Angus} :yes:
1:00:14] angus : tracing for completeness
1:00:33] sk1989 : {Gromit} thank u so much :)
1:00:42] baluacca : {Angus} u have to pay then
1:00:43] sana_s87 : thanks
1:00:46] gromit : Remember - look at and study past questions. Use those as
the incentive for getting into the text
1:00:47] angus : {Gromit} thanks
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