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“Compare the reported revenue figure to the budget and to the previous year, investigating any significant differences”
For what kind of assertion this test is used for (completeness/occurrence)?
Yes. Completeness and occurrence, but also accuracy, cut-off and classification. If this year’s figure is substantially different from last year’s, any of these assertions could be incorrect. For example, someone began debiting repairs to on-current assets (classification).
You have been given a list of procedures to carry out on revenue and you have decided to prioritise those which deal with the key assertion of occurrence.
Which of the following substantive procedures provide evidence over the OCCURRENCE assertion for revenue?
(1) Compare the reported revenue figure to the budget and to the previous year, investigating any significant differences
(2) Select a sample of goods despatched notes (GDNs) and agree to invoices in the sales day book
(3) Select a sample of invoices from the sales day book and agree to GDNs
(4) Select a sample of invoices and recalculate the invoiced amount agreeing to price list
A 1 and 2
B 1 and 3
C 2 and 4
D 3 and 4ANSWER IS
15 B
Option 1 does not make sense. could you please help me.
If this year’s revenue is $2m, this year’s budget is $1.2m and last year’s actual was $1m, you should worry about overstatement of this year’s actual ie did it all occur. Investigating the reasons for the increase will give evidence that it is real (or not, as the case may be).
Sorry sir if I may ask since I am also revising for the exams , is this procedure called analytical procedure due to the comparison of the revenue figure with the current year budget and also with the previous year revenue from the example you gave?
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