ExpertACCA · Question 14 · Audit Evidence
CASE SCENARIO: Global Freightways PLC
Global Freightways PLC is a cross-border logistics and shipping multinational. You are the audit senior for the year ended 31 March 20X7. The company has complex revenue recognition policies due to shipments spanning multiple accounting periods. Furthermore, they hold significant foreign currency bank accounts. Global Freightways relies heavily on a bespoke, automated IT system called 'Track-It' to record shipments, calculate freight charges, and generate invoices automatically based on weight and distance.
QUESTION:
Because shipments can take weeks to arrive, revenue should only be recognized when the performance obligation is satisfied (e.g., upon delivery). Which financial statement assertion is most at risk if Global Freightways recognizes revenue when the ship leaves the port rather than when it arrives at the destination?
CASE SCENARIO: Global Freightways PLC
Global Freightways PLC is a cross-border logistics and shipping multinational. You are the audit senior for the year ended 31 March 20X7. The company has complex revenue recognition policies due to shipments spanning multiple accounting periods. Furthermore, they hold significant foreign currency bank accounts. Global Freightways relies heavily on a bespoke, automated IT system called 'Track-It' to record shipments, calculate freight charges, and generate invoices automatically based on weight and distance.
QUESTION:
Because shipments can take weeks to arrive, revenue should only be recognized when the performance obligation is satisfied (e.g., upon delivery). Which financial statement assertion is most at risk if Global Freightways recognizes revenue when the ship leaves the port rather than when it arrives at the destination?
Answer options:
Completeness
Cut-off
Classification
Rights and Obligations
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