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

CA Meera is the auditor of Shree Annapurna Charitable Trust, which runs a free meal service funded mainly by public donations. Many donations are received in cash at collection boxes placed at temple gates. Which audit response is most appropriate for the completeness of this cash donation income?

The auditor should evaluate controls over collection boxes: sealed boxes, opening in the presence of multiple responsible persons, immediate counting, recording and banking. Anonymous cash donations cannot be confirmed, and bank deposits only show amounts already banked, so control testing is the main way to address completeness.

  1. AVerify the cash donations only by agreeing the bank deposit entries to the cash book, since the bank statement is external evidence
  2. BEvaluate the controls over opening of collection boxes, such as sealed boxes, opening in the presence of two or more trustees or officials, immediate counting, recording and bankingCorrect
  3. CRely on the management representation letter that all donations received have been recorded, as donors are anonymous
  4. DConfirm donation income directly with each donor through external confirmation requests

Explanation

Cash donations from anonymous donors cannot be confirmed and bank deposits only prove what was banked, not what was received. The auditor therefore assesses and tests the controls over collection, counting, recording and banking. Option A is wrong because it covers only recorded amounts, so unrecorded receipts would escape detection.

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