Need help!! Accuracy vs. Allocation and Valuation

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  • #196142
    kukuna2008
    Participant

    Hey Ninjas , need some help on the difference of Accuracy vs. Allocation and Valuation, I am so confused about which one apply in the particular scenario. I provide two examples below:

    1. The client has written up the investment land to current market value. Client use GAAP. this affect the management assertion of Allocation and Valuation.

    2. Auditor noted that the A/R subsidiary ledger is not reconcile to the control account due to a transportation error. In posting to the subsidiary ledger $4293 was inadvertently posted as 4239. This affect the management assertion of Accuracy.

    I thought first one should be Accuracy because of disclosure error, whereas second one should be Allocation and Valuation because it is a account balance error.

    Thank you so much!

    FAR - 83, 04/2015
    AUD - 73, 86, 08/2015
    REG - 75
    BEC - 71, rematch in 04/2016

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  • #687241
    Anonymous
    Inactive

    Valuation and allocation — That assets, liabilities, and equity interests are included in the financial statements at appropriate amounts (relative to the requirements of GAAP) and any resulting valuation or allocation adjustments are appropriately recorded.

    Accuracy — That amounts and other data have been recorded appropriately.

    My take is this:

    There is no active market for land assets so writing them up to “market value” is inappropriately valuing your asset.

    There is no assumption or judgment associated with the A/R balance in this instance. It was merely a typo.

    I guess I think of valuation as the underlying methodology, whereas accuracy is focused just on keystrokes.

    #687242
    Meddik
    Member

    BryGuy has it down, I'll express it in basically the same way but maybe the slight differences will help (I know multiple wording of the same topic helps me study a lot)

    Valuation & Allocation – Was the this proper method/correct amount in regards to GAAP? Writing up land to current market value is clearly not proper GAAP.

    Accuracy – More like errors. They followed GAAP, but simply messed it up in the process and therefore were inaccurate.

    The gray area would be if management tried to follow GAAP, but their estimate was unreasonable. I'd say that still falls into Valuation & Allocation because it's ultimately a GAAP departure, but I could see why it would be considered an inaccuracy.

    FAR - 86
    REG - 83
    AUD - 97
    BEC -

    #687243
    kukuna2008
    Participant

    Hi guys, t thank you for the replies! but, I have to say, it still confusing to me. these two concept are so similar and I am thinking there really no clear boundary. when it comes to test, I may just use one for all scenarios, at least will get some of them right.

    FAR - 83, 04/2015
    AUD - 73, 86, 08/2015
    REG - 75
    BEC - 71, rematch in 04/2016

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