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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 Ganesh Education Trust, a public charitable trust registered under the Maharashtra Public Trusts Act. During planning she notes that the trust receives substantial donations in cash at its counters. Which audit step is most appropriate to address the risk that all donations received are recorded?

The auditor should examine donation receipt counterfoils, check the continuity of serial numbers and trace the amounts to the cash book and bank deposits. This tests completeness of cash donations where external evidence is unavailable. Management representation alone is not adequate audit evidence.

  1. ARely only on the trustees' written representation that all donations are recorded
  2. BExamine the counterfoils of donation receipt books, check their serial continuity and trace them to the cash book and bank depositsCorrect
  3. CVerify only donations received through banking channels, since cash donations cannot be audited
  4. DConfirm the donation balances with the donors at the year end

Explanation

Cash donations have no external third-party evidence, so the auditor tests completeness through internal control over pre-numbered receipt books, serial checks and tracing collections to the cash book and bank. Representation alone is not sufficient audit evidence. Ignoring cash donations or confirming with anonymous donors is impractical.

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