Work in Progress – NBC Institute

AA – May 2017 – L2 – SA – Q4 – Inventory Accounting (IAS 2)

Examination of the importance of inventory and audit procedures for closing and work-in-progress inventory.

Question

For many businesses, inventory is one of the areas requiring most attention from the auditor.

You are required to:

(a) State FIVE reasons supportive of the importance of closing inventory to an Auditor. (5 Marks)
(b) Prepare a list of FIVE audit procedures relevant to ascertaining the cost of work-in-progress and finished goods. (5 Marks)
(c) State FIVE reasons why a physical count of inventory is important. (5 Marks)
(d) List FIVE reasons why the Auditor must be present at physical inventory count. (5 Marks)

Answer

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Tags: Audit Procedures, Finished Goods, Inventory, Physical Count, Work in Progress
Level: Level 2

Topic: Inventory Accounting (IAS 2)
Series: MAY 2017

AA – May 2024 – L2 – SA – Q7 – Fraud and Error

This question requires understanding of Key Audit Matters (KAMs) and their implications for Abati Quarries Limited's financial reporting.

Question

Abati Quarries Limited was registered with the Corporate Affairs Commission in 2017 and commenced operations in 2019. The beginning was rough, as the property, plant, and equipment costs were beyond the initial projections, and the company had to make do with fairly used equipment, which kept breaking down along the line.

Products were meant for supply to its parent company, Abati Estates, which is into real estate. Abati Quarries Limited hardly had substantial finished goods (granites) as closing inventory. The Audit Manager later insisted that boulder rocks blasted at the site should be regarded as unfinished inventory or work-in-progress.

In addition, the performance of Abati Quarries Limited was at variance with the performance of competitors in the industry, as the company had been returning losses from inception. The Audit Manager then required that the audit team should intimate the General Manager of the company of the decision to determine the cost of the boulder rocks and include it in the financial statements as closing work-in-progress. The General Manager, however, disagreed.

The Audit Manager therefore instructed you, the Audit Senior, to draft appropriate paragraph(s) on Key Audit Matters (KAMs), suitable for inclusion in the Independent Auditor’s report, to bring this matter to the attention of the company’s shareholders.

Required:

a. Explain “Key Audit Matters” (KAMs) in relation to the Audit Report. (2 Marks)

b. Explain TWO types of audit in which the auditor is required to communicate Key Audit Matters, in accordance with ISA 701. (3 Marks)

c. Draft the “Key Audit Matters” section for inclusion in the auditor’s report of Abati Quarries Limited to capture the “boulders” issue. (6 Marks)

d. Highlight TWO important matters the auditor will consider before determining if a matter is a Key Audit Matter. (4 Marks)

Answer

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Tags: Abati Quarries, Audit Manager, Financial Statements, Key Audit Matters, Work in Progress
Level: Level 2

Topic: Fraud and Error
Series: MAY 2024

FA – Nov 2011 – L1 – SA – Q14 – Accounting Concepts

This question asks about the effect of understating closing work-in-progress in a manufacturing account.

Question

The effect of understating closing work-in-progress in a manufacturing account is that it?

Answer

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Tags: Manufacturing Accounts, Work in Progress
Level: Level 1

Topic: Accounting Concepts
Series: NOV 2011

FA – May 2013 – L1 – SA – Q9 – Financial Statements Preparation

This question involves calculating the closing work-in-progress for a company.

Question

The following information relates to Ablaze Limited for the year ended 31 December 2012:

Prime cost: N122,000
Factory/production overheads: N185,000
Opening Work-in-progress: N40,000
Factory cost of goods completed: N300,000

What is the closing work-in-progress?

A. N47,000
B. N56,000
C. N66,000
D. N80,000
E. N100,000

Answer

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Tags: Accounting, Factory Cost, Work in Progress
Level: Level 1

Topic: Financial Statements Preparation
Series: MAY 2013

MI – May 2023 – L1 – SB – Q3 – Costing Methods

This question asks for the preparation of contract accounts for two contracts and shows profit taken at year-end.

Question

Joyle Construction Limited is currently working on two contracts with the following details as at December 31.

Details	Contract A (₦’000)	Contract B (₦’000)
Material	16,140	23,100
Wages	61,900	23,136
Expenses on site	8,270	10,344
Plant purchased	191,000	78,000
Accrued wages	5,060	2,690
Materials as at 31/12	2,670	7,680
Value of work certified	140,000	102,000
Cash received on certified work	119,000	76,500
Completed work not yet certified	4,450	2,640
Head office charges apportioned	15,660	12,230
Plant value as at 31/12	152,800	62,400

The contract value is ₦500,000,000 for Contract A and ₦350,000,000 for Contract B.

Required:
Prepare contract “A” and contract “B” accounts for Joyle Construction Limited as at December 31 in a columnar form. Show the profit taken at year-end and the balances carried forward. (Show workings where necessary).

Answer

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Tags: Contract Costing, Profit Recognition, Work in Progress
Level: Level 1

Topic: Costing Methods
Series: MAY 2023

AA – May 2017 – L2 – SA – Q4 – Inventory Accounting (IAS 2)

Examination of the importance of inventory and audit procedures for closing and work-in-progress inventory.

Question

For many businesses, inventory is one of the areas requiring most attention from the auditor.

You are required to:

(a) State FIVE reasons supportive of the importance of closing inventory to an Auditor. (5 Marks)
(b) Prepare a list of FIVE audit procedures relevant to ascertaining the cost of work-in-progress and finished goods. (5 Marks)
(c) State FIVE reasons why a physical count of inventory is important. (5 Marks)
(d) List FIVE reasons why the Auditor must be present at physical inventory count. (5 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Audit Procedures, Finished Goods, Inventory, Physical Count, Work in Progress
Level: Level 2

Topic: Inventory Accounting (IAS 2)
Series: MAY 2017

AA – May 2024 – L2 – SA – Q7 – Fraud and Error

This question requires understanding of Key Audit Matters (KAMs) and their implications for Abati Quarries Limited's financial reporting.

Question

Required:

a. Explain “Key Audit Matters” (KAMs) in relation to the Audit Report. (2 Marks)

b. Explain TWO types of audit in which the auditor is required to communicate Key Audit Matters, in accordance with ISA 701. (3 Marks)

c. Draft the “Key Audit Matters” section for inclusion in the auditor’s report of Abati Quarries Limited to capture the “boulders” issue. (6 Marks)

d. Highlight TWO important matters the auditor will consider before determining if a matter is a Key Audit Matter. (4 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Abati Quarries, Audit Manager, Financial Statements, Key Audit Matters, Work in Progress
Level: Level 2

Topic: Fraud and Error
Series: MAY 2024

FA – Nov 2011 – L1 – SA – Q14 – Accounting Concepts

This question asks about the effect of understating closing work-in-progress in a manufacturing account.

Question

The effect of understating closing work-in-progress in a manufacturing account is that it?

Answer

Find Related Questions by Tags, levels, etc.

Tags: Manufacturing Accounts, Work in Progress
Level: Level 1

Topic: Accounting Concepts
Series: NOV 2011

FA – May 2013 – L1 – SA – Q9 – Financial Statements Preparation

This question involves calculating the closing work-in-progress for a company.

Question

The following information relates to Ablaze Limited for the year ended 31 December 2012:

Prime cost: N122,000
Factory/production overheads: N185,000
Opening Work-in-progress: N40,000
Factory cost of goods completed: N300,000

What is the closing work-in-progress?

A. N47,000
B. N56,000
C. N66,000
D. N80,000
E. N100,000

Answer

Find Related Questions by Tags, levels, etc.

Tags: Accounting, Factory Cost, Work in Progress
Level: Level 1

Topic: Financial Statements Preparation
Series: MAY 2013

MI – May 2023 – L1 – SB – Q3 – Costing Methods

This question asks for the preparation of contract accounts for two contracts and shows profit taken at year-end.

Question

Joyle Construction Limited is currently working on two contracts with the following details as at December 31.

Details	Contract A (₦’000)	Contract B (₦’000)
Material	16,140	23,100
Wages	61,900	23,136
Expenses on site	8,270	10,344
Plant purchased	191,000	78,000
Accrued wages	5,060	2,690
Materials as at 31/12	2,670	7,680
Value of work certified	140,000	102,000
Cash received on certified work	119,000	76,500
Completed work not yet certified	4,450	2,640
Head office charges apportioned	15,660	12,230
Plant value as at 31/12	152,800	62,400

The contract value is ₦500,000,000 for Contract A and ₦350,000,000 for Contract B.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Contract Costing, Profit Recognition, Work in Progress
Level: Level 1

Topic: Costing Methods
Series: MAY 2023

Question Tag: Work in Progress

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AA – May 2017 – L2 – SA – Q4 – Inventory Accounting (IAS 2)

Examination of the importance of inventory and audit procedures for closing and work-in-progress inventory.

AA – May 2024 – L2 – SA – Q7 – Fraud and Error

This question requires understanding of Key Audit Matters (KAMs) and their implications for Abati Quarries Limited's financial reporting.

FA – Nov 2011 – L1 – SA – Q14 – Accounting Concepts

This question asks about the effect of understating closing work-in-progress in a manufacturing account.

FA – May 2013 – L1 – SA – Q9 – Financial Statements Preparation

This question involves calculating the closing work-in-progress for a company.

MI – May 2023 – L1 – SB – Q3 – Costing Methods

This question asks for the preparation of contract accounts for two contracts and shows profit taken at year-end.

AA – May 2017 – L2 – SA – Q4 – Inventory Accounting (IAS 2)

Examination of the importance of inventory and audit procedures for closing and work-in-progress inventory.

AA – May 2024 – L2 – SA – Q7 – Fraud and Error

This question requires understanding of Key Audit Matters (KAMs) and their implications for Abati Quarries Limited's financial reporting.

FA – Nov 2011 – L1 – SA – Q14 – Accounting Concepts

This question asks about the effect of understating closing work-in-progress in a manufacturing account.

FA – May 2013 – L1 – SA – Q9 – Financial Statements Preparation

This question involves calculating the closing work-in-progress for a company.

MI – May 2023 – L1 – SB – Q3 – Costing Methods

This question asks for the preparation of contract accounts for two contracts and shows profit taken at year-end.

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AA – May 2017 – L2 – SA – Q4 – Inventory Accounting (IAS 2)

Examination of the importance of inventory and audit procedures for closing and work-in-progress inventory.

You're reporting an error for "AA – May 2017 – L2 – SA – Q4 – Inventory Accounting (IAS 2)"

AA – May 2024 – L2 – SA – Q7 – Fraud and Error

This question requires understanding of Key Audit Matters (KAMs) and their implications for Abati Quarries Limited's financial reporting.

You're reporting an error for "AA – May 2024 – L2 – SA – Q7 – Fraud and Error"

FA – Nov 2011 – L1 – SA – Q14 – Accounting Concepts

This question asks about the effect of understating closing work-in-progress in a manufacturing account.

You're reporting an error for "FA – Nov 2011 – L1 – SA – Q14 – Accounting Concepts"

FA – May 2013 – L1 – SA – Q9 – Financial Statements Preparation

This question involves calculating the closing work-in-progress for a company.

You're reporting an error for "FA – May 2013 – L1 – SA – Q9 – Financial Statements Preparation"

MI – May 2023 – L1 – SB – Q3 – Costing Methods

This question asks for the preparation of contract accounts for two contracts and shows profit taken at year-end.

You're reporting an error for "MI – May 2023 – L1 – SB – Q3 – Costing Methods"

AA – May 2017 – L2 – SA – Q4 – Inventory Accounting (IAS 2)

Examination of the importance of inventory and audit procedures for closing and work-in-progress inventory.

You're reporting an error for "AA – May 2017 – L2 – SA – Q4 – Inventory Accounting (IAS 2)"

AA – May 2024 – L2 – SA – Q7 – Fraud and Error

This question requires understanding of Key Audit Matters (KAMs) and their implications for Abati Quarries Limited's financial reporting.

You're reporting an error for "AA – May 2024 – L2 – SA – Q7 – Fraud and Error"

FA – Nov 2011 – L1 – SA – Q14 – Accounting Concepts

This question asks about the effect of understating closing work-in-progress in a manufacturing account.

You're reporting an error for "FA – Nov 2011 – L1 – SA – Q14 – Accounting Concepts"

FA – May 2013 – L1 – SA – Q9 – Financial Statements Preparation

This question involves calculating the closing work-in-progress for a company.

You're reporting an error for "FA – May 2013 – L1 – SA – Q9 – Financial Statements Preparation"

MI – May 2023 – L1 – SB – Q3 – Costing Methods

This question asks for the preparation of contract accounts for two contracts and shows profit taken at year-end.

You're reporting an error for "MI – May 2023 – L1 – SB – Q3 – Costing Methods"

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