Skip to content

CA Intermediate · Auditing and Ethics · Special Features of Audit of Different Type of Entities

CA Meera is auditing the financial statements of Shree Annapurna Charitable Trust, a public charitable trust registered under the relevant state Act. The trust deed is silent on the audit format. Meera notes that donations received in cash at temples' collection boxes are a significant source of income. Which audit response is most appropriate?

The auditor should evaluate and test controls over collection boxes, such as joint counting by responsible persons, immediate recording and prompt bank deposit. Cash donations carry completeness risk, and a representation alone is not sufficient, nor can the area simply be excluded from the audit.

  1. AObtain assurance only on recorded donations, since unrecorded cash cannot be audited
  2. BEvaluate controls over the opening of collection boxes, such as counting by two or more responsible persons with proper recording and prompt deposit, and test themCorrect
  3. CRely on the trustees' written representation as sufficient evidence for completeness of donations
  4. DExclude donation income from the audit scope and report it as a limitation in every case

Explanation

Cash donations carry a completeness risk, so the auditor should assess and test controls such as joint counting, immediate recording and deposit. A management representation alone is not sufficient evidence, and cash donations cannot simply be excluded from scope.

Did you get it right without looking?

One question tells you little. A timed set on Special Features of Audit of Different Type of Entities shows your real accuracy, how long you take and where you lose marks.

Practise Special Features of Audit of Different Type of EntitiesFree diagnostic mock

More Special Features of Audit of Different Type of Entities questions