You are working on the audit of Civics Credit Union (CCU), a leading retailer of household furniture in Victoria, for the year ending 30 June 2021 Your work involves checking the related accounts in the sales and collection cycle Below is information about the related accounts The total number of invoices recorded during the year in the sales journal is 3,000,000 invoices, with total sales presented in financial statements being $26 million The number of customers presented in the accounts receivable age trial balance (AR ATB) is 3,060 customers, with the gross value of accounts receivable being $2,608 million When checking the sales and accounts receivable accounts, the audit manager indicates he would like you to design substantive procedures that focus on the audit objectives listed below ITEMS AUDIT OBJECTIVES Accounts receivable 1 Account receivables are the actual amount the customers owe to the client on the balance sheet date 2 Allowance for doubtful debts is adequately made and account receivables are presented based on their realizable value Sales account 3 Sales transactions are recorded at the correct amount 4 Sales transactions are recorded in the proper period 5 All sales transactions that occurred have been recorded Required (a) List one (1) substantive test you would like to perform to achieve each of the audit objectives listed above (b) Considering the impact of the covid 19 pandemic on CCUs 2021 financial situation, state the most important substantive test (1 test only) among the substantive test that you have proposed in requirement (a) and discuss the reason why you think the chosen test is the most important one (Limit your answer to 30 words) (c) You are asked to determine a sampling method for the substantive test that you choose in requirement (b) to collect sufficient appropriate audit evidence State the population and the sampling method you would like to use and discuss the reason (i e characteristics and advantages) why you choose this sampling method over other sampling methods (Limit your answer to 40 words)

Answered step by step

Verified Expert Solution

Link Copied!

Question

1 Approved Answer

Posted on Jul 20, 2021

You are working on the audit of Civics Credit Union (CCU), a leading retailer of household furniture in Victoria, for the year ending 30 June

You are working on the audit of Civics Credit Union (CCU), a leading retailer of household furniture in Victoria, for the year ending 30 June 2021. Your work involves checking the related accounts in the sales and collection cycle. Below is information about the related accounts:

The total number of invoices recorded during the year in the sales journal is 3,000,000 invoices, with total sales presented in financial statements being $26 million.

The number of customers presented in the accounts receivable age trial balance (AR ATB) is 3,060 customers, with the gross value of accounts receivable being $2,608 million.

When checking the sales and accounts receivable accounts, the audit manager indicates he would like you to design substantive procedures that focus on the audit objectives listed below:

ITEMS	AUDIT OBJECTIVES
Accounts receivable
1	Account receivables are the actual amount the customers owe to the client on the balance sheet date
2	Allowance for doubtful debts is adequately made and account receivables are presented based on their realizable value
Sales account
3	Sales transactions are recorded at the correct amount
4	Sales transactions are recorded in the proper period
5	All sales transactions that occurred have been recorded

Required:

(a) List one (1) substantive test you would like to perform to achieve each of the audit objectives listed above.

(b) Considering the impact of the covid-19 pandemic on CCU’s 2021 financial situation, state the most important substantive test (1 test only) among the substantive test that you have proposed in requirement (a) and discuss the reason why you think the chosen test is the most important one. (Limit your answer to 30 words)

(c) You are asked to determine a sampling method for the substantive test that you choose in requirement (b) to collect sufficient appropriate audit evidence. State the population and the sampling method you would like to use and discuss the reason (i.e. characteristics and advantages) why you choose this sampling method over other sampling methods. (Limit your answer to 40 words)