Detailed solution to the AUE3761 ASSIGNMENT 3 FOR 2020. solutions are fully explained and laid out in an easy to understand format. Guaranteed distinction!
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, QUESTION 1
a) Risk of material misstatement at the assertion level relating to
revenue for the year ended 30 June 2020
• There is a risk that the kilometres travelled between the wedding
venue and MRU offices might not be accurately determined when
determining the travel fee to be included in revenue;
• There is a risk that the number of photographers used in the
calculation of revenue might not be recorded accurately resulting in
misstatement of revenue; and
• There is a risk that settlement discount of 5% might not be deducted
from revenue for balances settled seven days or less prior to wedding
date.
• There is a risk that the amount charged per hour on service contracts
for photograph services is calculated using a rate different from the
one set at the company`s annual general meeting;
• There is a risk that revenue received from international clients might
not be properly converted into Rands in the financial statements. There
is a risk of converting the foreign revenue at the wrong exchange rate;
• At year end, there is a risk that deposit fees received are recognised
as revenue before the related performance obligation has been fulfilled
by the entity;
• There is a risk that revenue might be recorded at the gross amount
before deducting 10% trade discount for balances paid seven days or
more prior to the wedding date;
• There is a risk that finance income relating to 10% interest chargeable
from the first day after the wedding date on outstanding balances might
be wrongly allocated to revenue;
• There is a risk that revenue relating to products might be recognised
before the transfer of control to the clients;
• There is a risk that the total fee might be calculated without including
all of wedding rate, travel fee and product fee;
b) Automated controls that MRU should have in place to ensure that
information captured on the Memoir software is valid, accurate and
complete
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