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Kit Question

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AA Exams › Kit Question

  • This topic has 1 reply, 2 voices, and was last updated 1 year ago by Kim Smith.
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  • May 19, 2023 at 1:50 pm #684664
    maximus07
    Participant
    • Topics: 446
    • Replies: 437
    • ☆☆☆☆

    Which TWO of the following substantive procedures will provide evidence over the EXISTENCE of Eagle’s trade receivables other than the balance owing from Albatross Co?

    Calculate the receivables collection period and compare with prior year
    Perform a receivables circularisation
    Review post year-end cash receipts from customers
    Recalculate the allowance for irrecoverable receivables

    Answer is 2 and 3.
    My question is that 1 is analytical procedure so it will also show existence assertion. Why 1 is not correct?

    May 19, 2023 at 2:50 pm #684668
    Kim Smith
    Keymaster
    • Topics: 132
    • Replies: 8265
    • ☆☆☆☆☆

    Consider that the PRIMARY test for existence is external confirmation – so #2.
    But if there is no response, the auditor must perform alternative procedures such as see if the customer has paid the debt – so #3, or another alternative procedure would be to look at the make up of the balance, and for goods despatched checking that the customer signed for the receipt of the goods.

    All of the above involved some “interaction” with the customer – thereby confirming “existence”.

    Substantive analytical procedures don’t come close to this – they wouldn’t even consider individual customers.

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