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Hi Professor,
There was this 30 marks question and the ratios comparison was 2004 actual and 2005 forecast. it was the interim audit for 2015 September 30th. I had the doubt why we do interim audit for a foretasted numbers?
There appeared an error in my CBE and I started the exam after 45 minutes. I’m just concerned whether there had been any errors in my paper.
Thanks
I can only guess as I do not have access to the specific question but if you look at the Specimen Exam there is a 30 mark “planning question” for Milla Cola. Requirements for parts (a) to (c) concern audit planning. The scenario states “the company is forecasting revenue of $85 million”. As an alternative to stating this in narrative, the question could have provided extracts from the forecast financial statements (or draft financial statements if the year end has already passed).
It is the planning which is based on the forecast/draft financial statements (because the actuals won’t be known until after the audit is finished). An interim audit is not “on the forecast numbers” but on the controls over transactions. You could audit balances at an interim date (e.g. do a circularisation of trade receivable balances at 31 August) and then audit the “roll forward” to the reporting date – but clearly you can’t circularise forecast balances.
I think perhaps you misunderstood the scenario.
Thank you for the reply professor. We had to calculate ratios from the 2004 actual figures and 2005 forecasted figures. And next question was to show the control deficiencies and audit responses based on those ratios.
I did the Milla co. question before the exam. That was totally okay. This question was very weird. I feel like in the question it should have been 2005 Forecasted figures and 2005 Actual figures. I don’t know. I might be wrong.
Prior year actual and current year forecast would be consistent with planning an audit during the year. I can’t comment further perhaps another candidate can shed more light on it – I see you have commented in the feedback – so maybe someone will respond there.
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