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When Auditing, let's say I work for a manufacturing company. In account scoping what are the...

When Auditing, let's say I work for a manufacturing company. In account scoping what are the most important accounts to test? Why are these test the most important? Please Explain in depth.

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Answer #1

Some of the important accounts to test are:

  • Raw material/Inventory account: The major component of the cost in manufacturing company is their raw material, it is essential that company has raw material in store as depicted in the books
  • Accounts payable and Accounts Receivable account: Ensure that company has no overdue receivables or payables indicating the poor management of the due accounts
  • Sales account: Ensure that company is following the principals of revenue recognition while recording sales
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