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Dear Kim,
The dates for all the questions I’ve practised on Internal Controls are: 1 July (for the present day); the year-end is mostly after this date, say, 31 Aug or 30 Sept; but there is this question with a y/e before this date.
Please consider the extract below on the sales cycle and answer the following questions:
EXTRACT (Ref: 229 AMBERJACK; Kaplan Kit)
“It is 1 July 20X5. You are an audit manager of Pinfish & Co and you are reviewing extracts of
the documentation describing Amberjack Co’s sales and despatch system following
completion of the interim audit. Amberjack Co manufactures and distributes car tyres to a
wide customer base both in its country and across the rest of the continent. Its year end was
30 April 20X5.”QUESTIONS:
Q1: When is the asssessment of the client’s internal control system done?Q2: Is it not BEFORE the year-end, so as to allow the auditor to know (and plan) how much substantive testing is required (I think that’s what I learned from watching your AA lectures in this forum)?
P.S.:
This question is dated in a way that the auditor is at the final stage of the audit – that is, 2 months after the year-end, and I don’t think, practically, there would be enough time to plan and perform substantive testing 2 months after the client’s year end, if that is the time the controls are being tested.
It is even mentioned in the extract that the interim audit has been completed, meaning we (the auditors) are at the final stage of the audit.
Please provide clarity.
It is very strange indeed and I’ve not seen this query before. I have checked to two other sources reproducing this Q – and they have the same “discrepancy” (I do have the original in my office but won’t be there until Monday).
Possibly it is a mistake, and I don’t think it has any bearing on the question in this instance. (It could be that the Q was originally written just before the standardisation of it is 1 July 20X5, and that it wasn’t checked before it was set.) I think where dates are important they are checked.
But you are absolutely right – the nature of the question suggests that we should be before the reporting date. It would be interesting to look at a more recent controls Q to see if this discrepancy is repeated. (I suspect not, or I think someone would have drawn it to my attention before!)
Yes, Kim; indeed it has no bearing on the answer to the question but I just wanted to understand the concepts fully.
Thank you so much for making the clarification. 🙂
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