Question 1

SECTION A - CASE 3: HARVESTYIELD AGRITECH

HarvestYield AgriTech manufactures smart farming equipment. You are auditing the financial statements for the year ended 31 December 20X6. The company recently introduced a new line of AI-driven tractors, making older models potentially obsolete. Inventory is held at 15 different regional depots. The company uses a bespoke computerized inventory system. You are planning the inventory count attendance and the substantive testing of receivables, as several farming clients have requested extended payment terms due to a poor harvest season.

Which of the following financial statement assertions is most at risk regarding the older models of tractors held in inventory?

Accepted Answer

Link the risk of obsolescence to the requirement to value inventory at the lower of cost and net realizable value.

Question 2

What mistakes do candidates make on this ACCA question?

Accepted Answer

Selecting existence because the student assumes obsolete inventory might be thrown away and not recorded.

How to approach this question

Full Answer

Common mistakes

Practice the full ACCA AA — Audit and Assurance Practice Exam 2

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