Question
AUDIT AND ASSURAMCE Q4. The Lords Tennis Club owns 12 tennis courts. The club uses 'all weather' tarmac tennis courts, which have floodlights for night-time
AUDIT AND ASSURAMCE
Q4. The Lords Tennis Club owns 12 tennis courts. The club uses 'all weather' tarmac tennis courts, which have floodlights for night-time use. The club's year end is 30 September. Members pay an annual fee to use the courts and participate in club championships. The club had 430 members as at 1 October 20X5.
Income is derived from two main sources:
- Membership fees. Each member pays a fee of $200 per annum. Fees for the new financial year are payable within one month of the club year end. Approximately 10% of members do not renew their membership. New members joining during the year pay 50% of the total fees that would have been payable had they been members for a full year. During 20X6, 50 new members joined the club. No members pay their fees before they are due.
- Court hire fees: Non-members pay $5 per hour to hire a court. Non-members have to sign a list in the club house showing courts hired. Money is placed in a cash box in the club house for collection by the club secretary. All fees (membership and court hire) are paid in cash. They are collected by the club secretary and banked on a regular basis. The paying-in slip shows the analysis between fees and court hire income. The secretary provides the treasurer with a list of bankings showing member's names (for membership fees) and the amount banked. Details of all bankings are entered into the cash book by the treasurer
Main items of expenditure are:
1. Court maintenance including repainting lines on a regular basis.
2. Power costs for floodlights.
3. Tennis balls for club championships. Each match in the championship uses 12 tennis balls. The treasurer pays for all expenditure using the club's debit card. Receipts are obtained for all expenses and these are maintained in date order in an expenses file. The treasurer also prepares the annual financial statements.
Under the rules of the club, the annual accounts must be audited by an independent auditor. The date is now 13 December 20X6 and the treasurer has just prepared the financial statements for audit
Required:
(a) Describe the audit work that should be performed to determine the completeness of income for the Lords Tennis Club.
(b) Describe the audit procedures that should be performed to check the completeness and accuracy of expenditure for the Lords Tennis Club.
(c) Discuss why internal control testing has limited value when auditing not[1]for-profit entities such as the Lords Tennis Club.
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