ACCA Audit and Assurance (F8) Practice Exam

What is the purpose of matching GRN with purchase invoices during the final audit?

1. To calculate gross profit

2. To ensure expenses are overstated

3. To ensure purchases are recorded in the correct period

4. To minimize tax liability

The correct answer is: To ensure purchases are recorded in the correct period

The purpose of matching Goods Receipt Notes (GRN) with purchase invoices during the final audit is primarily to ensure that purchases are recorded in the correct period. This process is essential for accurate financial reporting, as it helps verify that the goods received are indeed accounted for in the financial statements corresponding to the period in which they were received. By performing this matching exercise, auditors can confirm that the company recognizes expenses and liabilities when the related goods are received, rather than when the invoice is paid. This alignment is critical in maintaining compliance with the accrual basis of accounting, which dictates that expenses should be recognized when incurred, not necessarily when cash changes hands. This approach enhances the integrity of the financial statements and ensures that the financial position of the entity is accurately reflected. Other options do not address the primary audit objective of ensuring proper period recording. Calculating gross profit refers to a different aspect of financial analysis, while overstating expenses does not align with audit aims of accuracy and truthfulness in financial reporting. Minimizing tax liability, while a concern for business strategy, does not influence the objective of ensuring adequate and appropriate recording of purchases in the accounting records.