Answers to the check-yourself questions

1. What ByteBook is

1. In one database file on the computer it runs on — ~/Library/Application Support/ByteBook/ on a Mac, %APPDATA%\ByteBook\ on Windows. A mistake is voided, not deleted: the original and its mirror image both stay in the record.
2. Any three of: a GST return built from the transactions; a bank reconciliation against an outside document; an audit trail that detects a changed entry; an invoice and its ledger entry staying in step; ledger integrity that can be re-verified.
3. The External Reporting Board (XRB), and the IAASB published by IFAC.

2. Set up a training business

1. So that nobody can hand out a login and lock the owner out of their own books. ByteBook requires the owner to have set a password before another sign-in can be switched on, and only the owner can open the security settings.
2. In ~/Library/Application Support/ByteBook/ on a Mac, or %APPDATA%\ByteBook\ on Windows, beside a backups folder holding the last thirty copies.
3. Understand is for reading what the business did; Set up is for changing how it is configured.

3. The twelve businesses

1. Bright Cuts has no GST. Marine Parade Rentals has exempt rent beside taxable supplies.
2. Any three of: every entry balances; every invoice's lines add up to its total; the GST in the return equals the GST in the ledger; the balance sheet balances; nothing is stored off the cent; a void cancels itself out; the fingerprint chain has no breaks; the assurance programme reports no exceptions (it may still carry notes for information).
3. More transactions fall inside one return, so a single misfiled or miscoded transaction distorts the whole period, and the reconciliation has more to prove.

4. Invoices

1. August, because that is when the performance obligation is satisfied. Money received in June is not revenue; it is an amount owed back in services.
2. Posting creates the entry and moves the reports. A draft is only a document.
3. It removes the ambiguity about whether a price includes GST, so no report has to guess which way a number was meant.

5. Payments and debtors

1. $700 still owing, aged from the invoice date. That is right: the customer still owes it, and the ageing is what tells you how long they have owed it.
2. It usually means a payment was recorded against the wrong invoice or was recorded twice, so the total owed is right while the detail is wrong.
3. The standard requires the allowance for trade receivables to be measured at lifetime expected credit losses. What is left to judgement is the estimate itself — the rates and the identification of debts known to be bad.

6. Bills, expenses and documents

1. February, because that is when the service was consumed. The date the money left the bank does not decide when the expense belongs.
2. A change in estimate is recognised prospectively, in this period and future ones. A material prior period error is corrected retrospectively.
3. Whether it was an expense at all, or an asset. Above about $1,000 the procedure lists it and marks the round number; whether the description is vague, or the cost looks personal, is for you to notice when you read the entry.

7. The bank statement

1. No. The balance may agree while part of the period is unrecorded, so the reconciliation is incomplete even though the arithmetic works.
2. It was produced by the bank rather than by the business, so it is independent of the records it is being used to check.
3. Which account the payment was for. The bank line is the cash that moved, GST included, and ByteBook takes any GST out of that amount; the account's own GST treatment decides whether there is any GST in it to take out.

8. GST

1. Invoice basis: the March return, because the invoice was issued in March. Payments basis: the May period, because that is when the money moved.
2. Box 5 is total sales and income from taxable supplies, including GST (standard-rated and zero-rated, but not exempt supplies); box 8 is the GST itself. Confusing them overstates the tax owed, and they are different questions.
3. So that there is a record of what was filed, at the date it was worked out. If the ledger changes later, ByteBook can warn that the filed return no longer matches the books, and without a snapshot there is nothing to compare against.

9. Reading the reports

1. Because GST collected was never the business's income; it is held on behalf of Inland Revenue until the return is filed.
2. Because a figure that should be zero is the fastest way to see that something is wrong. Stating a difference rather than hiding it turns a silent failure into a visible one.
3. Nothing appears in Money in and out for the purchase, because no cash moved. In a full statement of cash flows the purchase would be disclosed separately as a non-cash investing and financing transaction.

10. Closing a period

1. The order in the chapter, with bank coding and reconciliation before the GST return, because the return is built from the transactions: an uncoded bank line is a transaction the return has not seen. Reproducing the reports should come after every adjustment, so that the check tests the final figures.
2. Adjusting. The customer's difficulty existed at the reporting date; the liquidation is evidence of a condition that was already there, so the amounts are adjusted.
3. Stock is written down by $2,500 to its net realisable value of $5,500, and the write-down is an expense in the period.

11. Nothing is deleted

1. The record of what was posted, and therefore the ability of anybody else to agree with the corrected figure.
2. Because a voided entry keeps the fingerprint it was sealed with. The correction is a new entry; nothing about the old one changes.
3. That an experienced auditor with no previous connection to the audit can understand the procedures performed, their results, the evidence obtained, and the significant matters and judgements.

12. The audit trail and the chain

1. Because altering one entry breaks every fingerprint after it, so a change cannot be made quietly in the middle of the record.
2. That the record has not been altered since it was written. It does not prove that the entries are correct, or that they were posted to the right accounts.
3. Because the correction is part of the history. Removing it would break the chain and destroy the record an accountant expects to see.

13. The sixteen procedures

1. Because they call for different actions. An exception needs somebody to look at it and decide something; information is something you should know. Collapsing the two would either hide real findings or manufacture work.
2. A09, cut-off, which reports entries dated inside a period that has already been packed and closed.
3. No. The procedure reports what it found and leaves the conclusion to the person. Four exceptions are four questions, not a verdict.

14. Sealed packs and working papers

1. The pack's fingerprint fails to verify, and it is detected the next time the pack is verified, because the fingerprint is recomputed from the ledger as it stands now.
2. Because a void moves the period's totals. The correction is legitimate and the period has still changed after it was sealed, and the pack is designed to detect exactly that.
3. ByteBook can test that the two sides of every entry are equal and that the figures on the reports can be reproduced from the rows. It cannot judge whether a debt will be collected or whether a provision is adequate.

15. Roles and access

1. So that no role can be created that locks the owner out, and so that every role that exists was created deliberately by someone with the highest level of access.
2. Objectivity, which requires judgement without bias, conflict of interest or undue influence. A read-only login removes the question rather than relying on trust.
3. Who can sign in, when the books were last backed up, and whether anything failed quietly. It belongs in the programme because an auditor relies on the system, so how the system is controlled and who can reach it are relevant to that reliance.

16. Reading a standard reference

1. That it is the New Zealand version of an international standard: the IAASB's ISA 230 with New Zealand additions, issued by the XRB.
2. Because it names one specific requirement that a reader can find in a minute and check. A reference to a topic cannot be re-performed.
3. That the publisher's document at that address is no longer the copy this handbook was checked against — most likely a new version. Read the current version before relying on the reference.

20. How this handbook stays accurate

1. Every reference must name a standard that is in the library; every quoted paragraph must be found in the publisher's own text; and every document must still match the SHA-256 recorded when it was downloaded.
2. Because it is more likely to be believed. An obviously old handbook invites checking; a confident wrong one is followed.
3. Because a working paper about an earlier period still has to cite the rule that applied then.