CA Intermediate · Auditing and Ethics · Special Features of Audit of Different Type of Entities
CA Meera is appointed auditor of Shree Annapurna Trust, a public charitable trust registered under the Maharashtra Public Trusts Act. During planning she finds that the trust receives a large volume of small anonymous cash donations collected in donation boxes at its temple. Which audit response is MOST appropriate regarding completeness of this income?
The best response is to examine the trust's controls over collection of box donations, such as counting by two or more persons, recording in a register and prompt banking, and to test the records. Donors are anonymous and cannot be confirmed, so completeness depends on the strength of these controls.
- AObtain evidence of the trust's controls over opening the boxes, such as counting by two or more persons, recording in a register and prompt banking, and examine the related recordsCorrect
- BReport a qualified opinion straight away because anonymous donations can never be verified by an auditor
- CConfirm the donation amounts by sending confirmation requests to all the anonymous donors
- DTreat the donation income as verified once the closing cash balance agrees with the cash book
Explanation
For anonymous cash donations the auditor cannot confirm with donors, so the focus shifts to controls over collection and recording: joint counting, entry in a register, and regular deposit into the bank. An immediate qualification is premature because the auditor must first assess whether these controls exist and work. Agreeing the cash balance with the cash book only tests the cash on hand, not whether all collections were recorded.
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