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Dear Tutor
I hope you enjoy the long bank holiday weekend.
Could you please help me to understand below points:
1. in exam questions, there are often questions of audit risks and audit responses to those risks. the examiner report feedback the audit responses are approaches how auditing team take action in response to audit risk, could you elaborate more on how should answer those questions? those responses are different from substantive procedures, right?
2. is audit procedures the same as substantive procedures?
3. is below sentence assertion for completeness or existence?
Review post year-end cash receipts, if these relate to year-end receivables follow through to the sales ledgerhow to decide which procedure is for completeness and existence?
many thanks
I have written answers to Qs very similar to 1 & 2 recently – I will find them on Tuesday and send you the links.
Re 3. Existence is an assertion relevant to account balances – whereas completeness concerns both account balances and classes of transactions and disclosures – see Chapter 16.
Assertions are about the financial statements – look at a set of financial statements – look at the trade receivables balance – imagine all those customers who owe the company money that make up that balance.
What does it tell you if you look at cash receipts immediately after the year end? I suggest the answer is existence (there would be no cash if the balance did not exist) and also valuation (i.e. there is no need to make a loss allowance for amounts that have been settled).
For completeness of anything in the financial statements you have to ask yourself – has everything that should be included been included? So for trade receivables to be complete you would be asking – have all sales that should be recorded been recorded? To answer this you have to go back to the origin of sales – i.e. goods despatch and trace them through the accounting system.(See my post here https://opentuition.com/topic/june-2015-examiner-report)
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