1
Day 33 - Audit Risk Case Scenarios
Most important
The explanation to audit risk should contain the following:
a)
b)
c)
Sl.
No
1
2
3
Audit assertion affected
Specify overstatement/understatement of SOFP or SOPL (Specify the item, e.g. overstatement of PPE,
overstatement of receivables, understatement of provision etc.)
In case of detection risk, write “it leads to increased to detection risk”.
Audit Risk
Explanation
Auditor’s Response (Audit Procedures)
Company has purchased non- current
assets or has incurred refurbishment costs.
(December 2013)
There is a possibility this
may be wrongly classified as
revenue expenditure and
not as capital expenditure
resulting in understatement
of non-current assets and
understatement of profits.
This loan needs to be
correctly split between
current and non-current
liabilities in order to ensure
correct disclosure.
Review a breakdown of these costs to ascertain
the split of capital and revenue expenditure.
Also as the level of debt has
increased, there should be
additional finance costs.
Review financial statements to confirm the the
split between current and non-current
liabilities.
There is a risk that this has
been omitted from the
statement of profit or loss,
leading to understated
finance
costs
and
overstated profit.
If entity is not able to
maintain the minimum
balance, there is a possibility
it manipulated resulting in
overvaluation of assets.
If the loan covenants are
breached, the loan become
payable immediately and
this may give rise to material
uncertainties relating to
going concern. There is a
possibility that this material
uncertainty may not be
adequately disclosed in the
notes
to
financial
statements.
There is a possibility that the
research expenses may be
wrongly
classified
as
intangible assets resulting in
over valuation of intangible
Review the disclosures for this loan note to
ensure compliance with relevant accounting
standards.
Company has taken a long term loan.
(June 2015, June 2016, March/June 2019)
Bank has stated certain minimum balances
of assets to be maintained
4
The bank has attached loan covenants to
non-current liability that if these covenants
are breached, the loan will be repayable
immediately.
4.
Entity has incurred research and
development cost and all the development
cost have been capitalized.
(September 2016, December 2013)
AA Short Notes
Review financial statements to confirm it is
classified as non-current asset.
Inspect loan agreement to confirm it’s a long
term loan.
Review bank a/c to confirm the loan has been
received.
Maintain professional skepticism by being alert.
Use more experienced audit staff
Take more samples related to assets
Read notes to financial statements to confirm
going concern disclosures are relevant,
understandable and adequate.
Obtain a breakdown
development cost.
of
research
and
Inspect documents relating to this cost and
ascertain its nature-revenue or capital to ensure
Kappan’s School of Accountancy & Management
Basil Neelambra
2
5
6
7
8
Land and buildings will be revalued at the
year end.
(June 2016, June 2014)
ORDERED PLANT AND MACHINERY, but
Half of the order have not yet been
delivered.
During the year an asset has been disposed
of at a profit.
(June 2015)
During year-end inventory count there
were movements of goods in and out.
AA Short Notes
assets and understatement
of
expenses
and
overstatement of profits.
that only projects which meet the capitalisation
criteria are included as an intangible asset, with
the balance being expensed.
Some
of
development
expenditure may not have
met the IAS 36 criteria for
capitalization resulting in
over valuation of intangible
assets, understatement of
expenses
and
overstatement of profits.
Obtain a breakdown
development cost.
There is a possibility that the
treatment of revaluation
surplus or deficit may be
wrong.
The revaluation needs to be
carried out and recorded in
accordance with IAS 16
Property,
Plant
and
Equipment, otherwise noncurrent assets may be
incorrectly valued.
Only assets which physically
exist at the year-end should
be included in property,
plant and equipment.
`If items not yet delivered
have been capitalized, PPE
will be overvalued.
If depreciation is not
appropriately charged when
the asset is available for use,
this may result in assets and
profit being over or
understated
Profit on disposal may be
wrongly calculated resulting
in
understatement
or
overstatement of profits.
If the asset is not removed
from non-current assets, it
may result in over valuation
of non-current assets; it may
also result in wrong
treatment of depreciation.
There is a possibility that the
goods could have been
omitted or counted twice.
of
research
and
Inspect documents relating to these costs and
ascertain its nature-revenue or capital.
Inquire technical management to confirm
technical and commercial feasibility of the
project.
Review if the entire class of assets has been
revalued.
Review if the valuation is done by an expert. If so
whether the expert’s work can be relied uo on.
Review whether depreciation is charged on the
revalued figures by recalculating depreciation to
confirm accuracy.
Review allocation of revaluation surplus or deficit
in the financial statements.
Inspect the asset to confirm its existence and
ensure only appropriate assets are recorded in
the non-current asset register at the year end.
Recalculate depreciation to confirm accuracy.
Recalculate profit on disposal to confirm
accuracy.
Inspect non-current asset register to confirm it
has been removed from the non-current asset
register.
Review goods received notes and goods
dispatched notes received during the inventory
Kappan’s School of Accountancy & Management
Basil Neelambra
3
9
Inventory held at different warehouses.
(September/December 2017, December
2013)
This would result in
inventory being under or
over stated.
Auditor will not be able to
attend at all inventory
counts, increasing detection
risk and therefore they need
to ensure that they obtain
sufficient evidence over the
inventory counting controls,
and completeness and
existence of inventory for
any warehouses not visited.
count and review if it is included in the inventory
count records as correctly.
Attend and observe inventory count.
Re-perform inventory count.
Obtain external confirmation from third party
warehouses to confirm existence and rights and
obligations.
Inspect ownership documents to confirm which
warehouses are owned by the entity to confirm
rights and obligations.
Some of warehouse may be
owned by company and
some rented from third
parties.
Only warehouses owned by
company should be included
within PPE.
10
The company values inventory as selling
price less average profit margin.
(March/June 2019)
Otherwise, it will result in
overvaluation of PPE and
understatement of rental
expenses if company has
capitalized all warehouses.
Inventory should be valued
at the lower of cost and net
realizable value (NRV).
IAS 2 Inventories allows
inventory as selling price
less average profit margin
as long as it is a close
approximation to cost.
11
Standard cost are not update regularly
12
The company undertakes continuous
(perpetual) inventory counts.
(June 2014, March/June 2019)
13
Goods in transit.
(September 2016, June 2014)
AA Short Notes
If this is not the case, then
inventory could be under or
overvalued.
If standards costs are not
update regularly, it may
result in under or over
valuation of inventory.
All inventories must be
counted at least once a year.
Otherwise there is a
possibility that inventory
could
be
under
or
overvalued.
At the year end, there is a
risk that the cut-off of
inventory, purchases and
payables may not be
Inspect purchase invoice to confirm the cost of
inventory.
Testing should be undertaken to confirm cost and
NRV of inventory and that on a line-by-line basis
the goods are valued correctly.
In addition, valuation testing should focus on
comparing the cost of inventory to the selling
price less margin for a sample of items to confirm
whether this method is actually a close
approximation to cost.
Inspect purchase invoice of raw materials to
confirm cost.
Attend & Observe inventory count.
Re-perform inventory count.
The audit team should undertake detailed cut-off
testing of purchases of goods at the year end.
Kappan’s School of Accountancy & Management
Basil Neelambra
4
accurate and may
under/overstated.
14
15
The company undertakes
production in its factory.
(June 2016)
continuous
The company outsources the payroll work
(June 2016, March/June 2019)
be
As production will not cease,
the exact
Cut-off of the work in
progress will need to be
assessed.
If the cut-off is not correctly
calculated, the inventory
valuation may be under or
overstated.
A detection risk arises as to
whether sufficient and
appropriate evidence is
available at Company to
confirm the completeness
and accuracy of controls
over payroll.
The payroll processing had
transferred
to
service
entity.
16
The company outsourced its sales ledger
processing to an external service
organization
(March/June 2018)
If any errors occurred
during the transfer process,
these could result in the
payroll charge and related
employment tax liabilities
being under/overstated.
A detection risk arises as to
whether sufficient and
appropriate evidence is
available at Blackberry Co to
confirm the completeness
and accuracy of controls
over
the
sales
and
receivables
cycle
and
balances at the year end.
The sales ledger processing
had transferred to service
entity.
17
There have been a significant number of
sales returns made subsequent to the year
end.
(June 2015)
AA Short Notes
If any errors occurred
during the transfer process,
these could result in sales
and
receivables
being
under/overstated.
As these relate to pre yearend sales, they should be
removed from revenue in
the
draft
financial
statements
and
the
inventory reinstated.
Review last GRN of the current year and the first
GRN of the next financial year ensure that cutoff is complete and accurate.
Inspect production records to confirm the
percentage of completion of WIP.
Inquire management to the extent of payroll
work done by service organization.
Contact the service auditor to confirm the level
of controls in place.
Discuss with management the transfer process
undertaken and any controls put in place to
ensure the completeness and accuracy of the
data.
Where possible, undertake tests of controls to
confirm the effectiveness of the transfer controls.
In addition, perform substantive testing on the
transfer of information from the old to the new
system.
Inquire management to the extent of payroll
work done by service organization.
Contact the service auditor to confirm the level
of controls in place.
Discuss with management the transfer process
undertaken and any controls put in place to
ensure the completeness and accuracy of the
data.
Where possible, undertake tests of controls to
confirm the effectiveness of the transfer controls.
In addition, perform substantive testing on the
transfer of information from the old to the new
system.
Review a sample of the post year-end sales
returns and confirm if they relate to pre year-end
sales, that the revenue has been reversed and the
inventory included in the year-end ledgers.
Kappan’s School of Accountancy & Management
Basil Neelambra
5
18
19
20
21
22
A sales-related bonus scheme has been
introduced in the year.
(March/June 2017, June 2014)
Receivables are considerably higher than
the prior year.
(June 2016, June 2014)
The finance director of the company has
decided to release the opening provision of
allowance for receivables as he feels it is
unnecessary.
(September 2016,September/December
2017, December 2013)
Company’s previous finance director left
after it was discovered that he had been
committing fraud with regards to expenses
claimed.
Senior management (e.g. finance director)
has left and his or her replacement will take
place after three months.
AA Short Notes
If the sales returns have not
been correctly recorded,
then revenue will be
overstated, and inventory
understated.
Sales staff seeking to
maximise their current year
bonus may result in new
accounts being opened from
poor credit risks leading to
irrecoverable receivables
resulting in overvaluation
of receivables.
This may lead to sales cutoff errors with employees
aiming to maximize their
current year bonus resulting
in overstatement of sales.
There are concerns about
the creditworthiness of
some customers.
There is a risk that some
receivables
may
be
overvalued as they are not
recoverable.
There is a risk that
receivables
will
be
overvalued, as
Some balances will be
Irrecoverable and so will be
overstated if not provided
for.
There is a risk that he may
have undertaken other
fraudulent
transactions;
leading to an increased
control risk which has not
yet been identified.
These would need to be
written off in the statement
of profit or loss.
If these have not been
uncovered, the financial
statements
could
be
materially misstated due to
fraud.
There is no one in that
department to oversee the
functions which may result
in material misstatement
due to fraud or error.
Increased sales cut-off testing will be performed
along with a subsequent event review of any post
year-end cancellations of contracts as they may
indicate cut-off errors.
Perform subsequent event review by verifying
post year end cash receipt to confirm the
recoverability of receivables.
Perform subsequent events review by verifying
post yearend cash receipts from accounts
receivables to confirm recoverability.
Review whether allowances for irrecoverable
debts are reasonable.
Discuss with the director the rationale for
reducing the allowance for receivables.
Perform subsequent events review by verifying
post yearend cash receipts to confirm
recoverability.
Review aged receivables ledger to asses the need
for an allowance on receivables.
Inquire those charged with governance what
procedures they have adopted to identify any
further frauds by the previous finance director.
Maintain professional skepticism by being alert
throughout the audit for further possible
misstatements due to fraud.
Additional substantive testing should be
conducted over the affected areas of the
accounting records.
Maintain professional skepticism by being alert
to possible misstatements due to fraud or error.
Perform more substantive procedures for these
three months.
Kappan’s School of Accountancy & Management
Basil Neelambra
6
23
24
25
The bonus scheme for senior management
and directors of the Company has been
changed; it is now based on the value of
year-end total assets.
(September 2016, December 2013)
There is a risk that
management might be
motivated to overstate the
value of assets.
Company is planning to make some
employees redundant after the year end.
(June 2016, March June 2019)
Redundancy provision will
be required at the year end.
New accounting software was introduced
and the old and new systems were not run
in parallel.
(September 2016, December 2013)
26
Branches maintained their own financial
records and now it is centralized at head
office.
27
The company is a new client for the audit
firm.
(September/December 2017, June 2014)
28
A number of reconciliations, including the
bank reconciliation, were not performed at
the year end.
(September 2016)
29
No supplier statement or purchase ledger
control account reconciliations have been
performed.
(March/June 2018)
AA Short Notes
Failure to provide will result
in an understatement of
provisions and expenses
There is a risk of the opening
balances may be not being
accurately transferred to the
new system resulting in
material misstatement due
to fraud or error.
If this is not done, this could
result in the auditor not
identifying a significant
control risk.
There is a risk of the opening
balances may be not be
accurately transferred to
head
office
accounts
resulting
in
material
misstatement due to fraud
or error.
As the team is not so familiar
with the
accounting
policies,
transactions and balances,
there will be an increased
detection risk
At the year end, it is
important to confirm that
balances including bank
balances are not under or
overstated.
It may affect valuation of
bank balance.
This a key control which is
being overridden and as
such there is an increased
risk of errors within trade
payables and the year-end
payables balance may be
under or overstated.
Maintain Professional skepticism by being alert
throughout the audit for possible misstatement
due to fraud.
Perform more substantive procedures with
respect to asset.
Review board minutes and correspondence to
employees relating to redundancy.
Recalculate redundancy provision to confirm
accuracy.
Review and reconcile opening balance.
The auditor should document and test the new
system.
Review and reconcile opening balance.
Maintain professional skepticism (being alert to
possible misstatement due to fraud or error).
Audit firm should ensure they have a suitably
experienced team.
Also, adequate time should be allocated for
team members to obtain an understanding of
the company and the risks of material
misstatement.
Discuss this issue with the finance director and
request that the December reconciliation is fully
reconciled.
The reconciling items should be tested in detail
and agreed to supporting documentation.
Re-perform bank reconciliations.
Request management prepare a year-end
purchase ledger control account reconciliation.
The audit team should undertake a detailed
review of this reconciliation with a focus on any
unusual reconciling items.
Kappan’s School of Accountancy & Management
Basil Neelambra
7
30
31
32
33
34
Company has issued further shares at a
premium
(March/June 2018)
Significant finance has been obtained in the
year, as the company has issued
irredeemable preference shares.
If this is not done, then the
accounts may be misstated
due to a lack of disclosure or
share capital and share
premium may be misstated.
As the preference shares are
irredeemable, they should
be classified as equity rather
than non-current liabilities.
Failing to correctly classify
the shares could result in
understated equity and
overstated
non-current
liabilities.
Auditor will not be able to
obtain
sufficient
and
appropriate audit evidence
resulting in detection risk.
Audit reporting time is quite short
(March/June 2017)
Current ratio of the company is higher
compared to previous year
Increase in gross profit margin, but
operating margin has not increased
proportionately
(March/June 2019)
AA Short Notes
This needs to be accounted
for correctly, with adequate
disclosure made and the
equity finance needs to be
allocated correctly between
share capital and share
premium.
In addition, the finance
team of Hurling Co will have
less time to prepare the
financial
information
leading to an increased risk
of errors arising in the
financial statements.
There is a possibility for a
material misstatement due
to fraud or error since
current assets may be
overstated
or
current
liabilities understated
There is a possibility of
wrong
classification
between direct expenses
(cost of sales) and indirect
expense
(operating
expenses)
leading
to
understatement of cost of
sales and overstatement of
operating expenses.
The audit team should increase their testing on
trade payables at the year end, including
performing supplier statement reconciliations,
with a particular focus on completeness of trade
payables.
The audit team should confirm that proceeds
were received and that the split of share capital
and share premium is correct and appropriately
recorded.
In addition, the disclosures for this finance
should be reviewed in detail to ensure
compliance with relevant accounting standards
and local legislation.
Review share issue documentation to confirm
that the preference shares are irredeemable.
Confirm that they have been correctly classified
as equity within the accounting records.
Review bank a/c to confirm
proceeds of were received.
total financing
Perform interim audit
Maintain professional skepticism by being alert
to increased risk of errors.
Maintain professional skepticism by being alert.
Use more experienced audit staff
Take more samples related to current asset and
current liabilities.
Review the classification of costs between cost of
sales and operating expenses.
Compare current year cost of sales and operating
expenses with prior year and any inconsistencies
investigated.
Kappan’s School of Accountancy & Management
Basil Neelambra
8
35
Receivable days have increased from 49 to
91 days and management has significantly
extended the credit terms given to
customers.
(June 2013)
This leads to an increased
risk of recoverability of
receivables as they may be
overvalued.
36
Inventory days have increased
inventory turnover has fallen.
(June 2013)
There is a risk that inventory
is overvalued.
37
Inventory includes overhead cost
(March/June 2018)
and
Review aged analysis to asses the need for an
allowance on receivables.
Only production overhead
should be included in
inventory.
If nonproduction overheads
are included, it will result in
overvaluation of inventory.
38
39
Preliminary analytical review of the draft
statement of profit or loss has identified a
significant fall in administration expenses.
(December 2014)
The company has decreased the selling
price of products significantly and there are
increased levels of inventory expected at
the year end.
(December 2014)
Perform subsequent events review by verifying
post year end cash receipts to confirm the
recoverability.
Administration
expenses
tend to be fixed costs and
hence would be unlikely to
fluctuate significantly with
changes in sales volumes.
Hence there is a risk that
administration
expenses
are understated.
It is possible that the selling
price may have fallen so that
the net realisable value
(NRV) of inventory is below
cost.
Detailed cost and net realisable value (NVR)
testing to be performed and the aged inventory
report to be reviewed to assess whether
inventory requires writing down.
Review break down of production and
nonproduction overheads and confirm only
production overheads are included in the
inventory.
If general overheads (non-production) are
included, request management remove them
from the valuation to be included in the draft
financial statements
Update the analytical review with the full year
results and if significant fluctuations on prior year
remain, discuss these with management.
Inspect invoices related to administrative
expense and obtain supporting evidence to verify
management explanations.
The auditor should undertake detailed cost and
NRV testing to assess whether inventory is
overvalued and requires write down.
IAS 2 Inventory requires
inventory to be stated at the
lower of cost and NRV.
40
41
Due to the fall in demand for goods, there
are some goods where the selling price may
be below cost.
(June 2013)
The financial controller of the company was
dismissed and is threatening to sue the
company for unfair dismissal.
(December 2014, March/June 2018)
AA Short Notes
Hence it is possible that
inventory is overvalued.
IAS 2 Inventories requires
that inventory should be
stated at the lower of cost
and NRV.
If the company fails to value
inventory at NRV, there is a
risk that inventory may be
overvalued.
If it is probable that Eagle
will make payment to the
financial
controller,
a
provision
for
unfair
dismissal is required.
Detailed cost and net realisable value (NVR)
testing to be performed and the aged inventory
report to be reviewed to assess whether
inventory requires writing down.
The audit team should write to the company’s
lawyers to enquire of the existence and likelihood
of success of any claim from the former financial
controller.
Kappan’s School of Accountancy & Management
Basil Neelambra
9
If the payment is possible
rather than probable, a
contingent
liability
disclosure
would
be
necessary.
42
43
44
The financial controller has been dismissed
and his tasks have been allocated between
the finance department team, this has
increased their workload.
(December 2014)
The purchase ledger supervisor has left and
no reconciliations of supplier statements
and purchase ledger control account have
been performed.
(December 2014)
The finance director has extended the
useful lives of fixtures and fittings from
three to four years, resulting in the
depreciation charge reducing.
(March/June 2017, June 2013)
If Eagle has not done this,
there is a risk over the
completeness
of
any
provisions or contingent
liabilities.
This increases the inherent
and control risk within Eagle
as errors may have been
made within the accounting
records by the overworked
finance team members and
there is no one working in a
supervisory capacity.
There is an increased risk of
errors within trade payables
and the year-end payable
may
be
under
or
overstated.
Under IAS 16 Property, Plant
and Equipment, useful lives
are to be reviewed annually,
and if asset lives have
genuinely increased, then
this change is reasonable.
Auditor should maintain professional scepticism
by being alert throughout the audit for additional
errors within the finance department.
In addition, discuss with the finance director
whether he will be able to provide the team with
assistance for any audit issues as there is no
financial controller available.
The audit team should increase their testing on
trade payables at the year end, with a particular
focus on completeness of payables.
A detailed review of the year-end purchase
ledger control account reconciliation should be
performed with a focus on any unusual
reconciling items.
Discuss with the directors the rationale for any
extensions of asset lives and reduction of
depreciation rates.
Also, the four-year life should be compared to
how often these assets are replaced, to assess
the useful life of assets.
However, there is a risk that
this reduction has occurred
in order to boost profits.
45
A customer has been encountering
difficulties paying their outstanding
balance.
(March/June 2017)
If this is the case, then
fixtures and fittings are
overvalued, depreciation
undercharged and profit
overstated.
If
the
customer
is
experiencing
difficulties,
there is an increased risk
that the receivable is not
recoverable and hence is
overvalued.
Perform subsequent events review by verifying
post year end cash receipts to confirm the
recoverability.
Discuss with the finance director whether he
intends to make an allowance for this
receivable.
If not, review whether any existing allowance for
uncollectable accounts is sufficient to cover the
amount of this receivable.
AA Short Notes
Kappan’s School of Accountancy & Management
Basil Neelambra
10
46
The company is intending to propose a final
dividend once the financial statements are
finalised.
(March/June 2017)
This amount should not be
provided for in the current
year financial statements, as
the obligation only arises
once the dividend is
announced, which is post
year end.
Discuss the issue with management and confirm
that the dividend will not be included within
liabilities in the current year financial statements.
Review the financial statements to ensure that
adequate disclosure of the proposed dividend is
included.
In line with IAS 10 Events
after the Reporting Date the
dividend should only be
disclosed.
47
The company is planning to undertake the
full year-end inventory counts after the
year end and then adjust for movements
from the year end.
(March/June 2018)
If the dividend is included,
this will result in an
overstatement of liabilities
and understatement of
equity.
If the adjustments are not
completed accurately, then
the year-end inventory
could
be
under
or
overstated.
The auditor should attend the inventory count
held after the year end and note details of goods
received and despatched post year end, in order
to agree to the reconciliation.
During the final audit, the year-end inventory
adjustments schedule should be reviewed in
detail and agreed to supporting documentation
obtained during the inventory count for all
adjusting items.
48
49
50
A large batch product has been damaged in
the production process and will be in
inventory at the year end. No adjustment
has been made by management.
(December 2013)
Due to the damaged products, a number of
customers have complained.
(December 2013)
The directors have each been paid a
significant bonus and separate disclosure
of this in the financial statements is
required by local legislation.
(June 2014)
AA Short Notes
The valuation of inventory
as per IAS 2 Inventories
should be at the lower of
cost and net realisable
value.
Hence it is likely that this
inventory is overvalued.
It is likely that for any of the
damaged goods sold, Minty
will need to refund these
customers.
Revenue
is
possibly
overstated if the sales
returns are not completely
and accurately recorded.
The
directors’
remuneration
disclosure
will not be complete and
accurate if the bonus paid is
not disclosed in accordance
with the relevant local
legislation.
The audit team should increase the extent of
inventory cut-off testing at the year end and at
the date of the count.
Detailed cost and net realisable value testing to
be performed to assess how much the inventory
requires writing down by.
Review the breakdown of sales of damaged
goods and ensure that they have been accurately
removed from revenue.
Discuss this matter with management and review
the disclosure in the financial statements to
ensure compliance with local legislation.
Kappan’s School of Accountancy & Management
Basil Neelambra
11
51
A number of assets which had not been
fully depreciated were identified as being
obsolete.
(March/June 2019)
This is an indication that the
company’s
depreciation
policy of non-current assets
may not be appropriate, as
depreciation in the past
appears to have been
understated.
Discuss the depreciation policy for non-current
assets with the finance director and assess its
reasonableness.
Enquire of the finance director if the obsolete
assets have been written off.
If so, review the adjustment for completeness.
If an asset is obsolete, it
should be written off to the
statement of profit or loss.
52
The company is planning to include a
current asset, which relates to advertising
costs incurred and adverts shown on TV
before the year end.
Therefore,
depreciation
may be understated and
profit
and
assets
overstated.
The costs were incurred and
adverts shown in the year
and there is no basis for
including them as a current
asset at the year end.
The costs should be
recognised in operating
expenses in the current year
financial statements.
Discuss with management the rationale for
including the advertising as a current asset.
Review supporting documentation for the
advertisements to confirm that all were shown
before the year end.
Request that management remove the current
asset and record the amount as an expense in the
statement of profit or lospayrolls.
If these costs are not
expensed, current assets
and
profits
will
be
overstated and operating
expenses understated.
AA Short Notes
Kappan’s School of Accountancy & Management
Basil Neelambra