CA Final · Financial Reporting · Accounting and Technology

Kaveri Logistics Ltd. uses robotic process automation (RPA) bots to post vendor invoices into its accounting system. During the year the bot was reconfigured and, without any testing or approval, started posting invoices of the following month's dates into the current period. Which is the most significant financial reporting risk arising from this lapse?

The main risk is a cut-off misstatement of expenses and payables. The bot was changed without testing or approval, a program change control failure, so invoices were posted in the wrong period. Depreciation, equity classification and fair value disclosures are not affected by invoice posting dates.

ACut-off misstatement of expenses and payables due to weak program change controlCorrect
BUnderstatement of depreciation due to wrong useful life
CMisclassification of equity instruments as liabilities
DIncorrect fair value hierarchy disclosure

Explanation

An untested change to the bot is a change management failure that affects the dates on which transactions are recorded. This creates a cut-off error in expenses and payables. Depreciation, equity classification and fair value hierarchy are unrelated to invoice posting dates.

Did you get it right without looking?

One question tells you little. A timed set on Accounting and Technology shows your real accuracy, how long you take and where you lose marks.

Practise Accounting and Technology Free diagnostic mock

More Accounting and Technology questions