accruing annual audit costs of €12k

J

Josvill2010

Registered User
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Hi,
If you were told today that the Audit cost for the year would be 12K .

Would you accrue 6K in June and then every month an extra 1K, after reversing the accrual every month?

This month expenses would reflect an Audit cost of 6K

Thanks,
j
 
If you are preparing management accounts or subsidiary accounts for consolidation, you should have accrued €1k per month. As its now June, I would accrue €2k per month. It would not be right to do the full correction in June.

If not doing management accounts or subsidiary accounts for consolidation, I would just accrue the 12k now.
 
Accrual

Hi Paddy,

Thanks for your reply.
Management accounts are closed monthly. I'd like your idea of accrue 2K each month going forward. But would the accouts not be understated as we hit them with a 2K accrual instead of 1K going forward.

The other alternative of posting 6K to June, only affects 1 month but once the June correction is rectified, the remaining months are hit with the appropiate amount. What are your thoughts about this? I still like your idea better as it speads June cost over in 6 months.

thanks,
j
 
I find that when reviewing management accounts, more emphasis is put on the "Year-to-Date" figures tham individual months.

I would therefore accrue 6k in June, and a further 1K for each of the remaining 6 months of the year.
 
The main thing is that you have €12k accrued at year end for when the liabiliy arises.

The idea of management accounts is that you spread the costs over the course of the year. If you missed the Jan/May period, it falls on the other periods evenly.

I really wouldn't get bogged down in it unless the users of this information are very strict.
 
Interim Management a/c's should reflect all costs incurred to date. Therefore you should accrue the 6 mths now. It is a pretty black and white issue. People reading management accs have a reasonable expectation that fixed costs for the first half of the year will be approximately equal to fixed costs for the 2nd half. If you want to hide your error you can accrue 2k per mth from here on to end of year but it is not correct. You will likely get away with it though.

If you are preparing accounts for a subsidiary of a company that is listed it would technically be classsed as false accounting not to accrue the 6 mths to date.

Management accs are not about creating a "level picture" for management as previous posters seem to suggest.
 
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