Audit opinion – past paper june/07

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  • Avatar of sids
    sids
    Participant
    • Topics: 4
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    Hello, could you please explain the audit opinion to me, Im not getting how is this inability to obtain sufficient appropriate audit evidence?

    Q-MSV
    (b)
    Issue 1-
    ” Audit tests on sales indicates a deficiency in the internal control system, with a potential understatement of income in the region of $500,000. The deficiency occurred because sales invoices are not sequentially numbered, allowing one of the directors to remove cash sales prior to recording in the sales days book. This was identified during analytical procedures of sales, when the audit senior noted that on the days when this director was working, sales were always lower than the days when the director was not working.”


    Avatar of gromit
    gromit
    Keymaster
    • Topics: 1
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    If invoices are not prenumbered it is difficult, as here, to test completeness. The auditors have estimated a potential understatement of 500,000 ( not sure how) but there might be no understatement at all or anything between 0 and 500,000. Hence lack of evidence.

    HTH


    Avatar of sids
    sids
    Participant
    • Topics: 4
    • Replies: 109

    Thanks a lot, gromit. May you be blessed.

    I thought of not adding a reply since you get to know by your name in the last thread that you’ve answered. Hope you’re not bothered.

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