14:55 Sat 17 Oct 69% Q .. . REQUIRED Page 414 Explain whether you would take a substantive approach or an approach that uses tests of controls as well as substantive procedures (combined approach) in undertaking the audit. LO 9.19 Source: This question was adapted from the Chartered Accountants Program of the Institute of Chartered Accountants in Australia, 2009 (2) audit and assurance module. 9.15 MEDIUM Consider the following two independent situations: (i) Elder Care Lid operates several nursing homes in Victoria. All residents are charged a fixed fee per week as set by legislation. Due to the quality of care provided, occupancy rates are always at or very close to full. You have tested controls surrounding occupancy revenue and results support a high level of reliance on these controls. (ii) Cheap Stores Pty Ltd operates a chain of discount stores selling a large range of continually changing merchandise. Cheap Stores is majority owned and run by Carole Kee. Carole handles all inventory purchases for the business, scouring auction houses in order to buy large lots of liquidated stock at bargain prices. Carole makes all decisions regarding what stock to purchase, the price to pay and, given that goods sold at auction have to be paid for immediately, is the sole signatory to the company's bank account. While you have determined that there are no controls over inventory purchases on which you can place reliance, you do note that Carole keeps all available documentation, which is passed on to the accountant for checking and processing REQUIRED You are planning your year-end substantive procedures for each of the two independent situations above. Explain how the information provided would affect the nature, timing and extent of substantive procedures for occupancy revenue in situation (i) and purchases for situation (ii). LO 9.1 Source: This question was adapted from the Chartered Accountants Program of the Institute of Chartered Accountants in Australia, 2006 financial reporting and assurance module