AA BPP Kit

Hi Kim,

Question –

You are an audit senior of KLT & Co, and your firm has recently been appointed as the auditor to South, a private company that runs seven supermarkets in the UK. You are currently planning your firm’s audit of South and are shortly due to make a preliminary visit to South’s head office.
Four months before the year end, the company installed a new till system in all supermarkets. The new till system is linked to the accounting system at head office and automatically posts transactions to the accounting system.
Previously journals were made manually based on totals on till rolls. The cost of the new till system which South has capitalised as a non-current asset.
The audit engagement partner has also said that she has is concerned that the new till system may not be reliable, and that consequently not all sales have been recorded, resulting in an understatement of revenue. She is also
concerned that staff may not yet be familiar with the system, leading to an increased risk of errors relating to data entry.

The audit engagement partner has stated that the new till system may not be reliable. Which TWO of the following statements represent valid responses to this audit risk?

1) Perform analytical procedures by comparing daily/weekly sales by store with both the prior year and
with expectations, in order to determine whether any unusual patterns have occurred following the
installation of the new system
2) Vouch the sales revenue per the system to the till receipts to confirm the accuracy of the sales
3) Obtain a copy of the training manual relating to the new till system and discuss with directors the
extent of training staff have received on the new system
4) Agree sales revenue from till receipts to the cashbook to determine the accuracy of till receipts

The answer is 1 and 3.

I still wonder why 4 is not a valid response. The answer in the kit is:

“..Vouching the revenue per the system back to till receipts is not a valid response to the audit risk. Given that one concern is that revenue is understated, testing should be from the till receipts to the system to ensure that all sales have been recorded. Similarly, agreeing revenue from till receipts to the cashbook is also the wrong way around – this test should begin with the cashbook in order the test for completeness”

Now why test from till receipts to the system is valid to ensure completeness, but not from till receipts to cashbook? The answer states that it should be from cashbook to receipts, which imo is the opposite of test from till receipts to the system. So why it still ensures the completeness?

Thank you!