CA Intermediate · Auditing and Ethics · Special Features of Audit of Different Type of Entities
CA Tarun audits Lotus Hospital Trust. The trust receives donations in cash from anonymous donors during a festival, and records show a collection box register that is not signed by two persons. Under SA 330 and general audit principles for entities with cash donations, which response is most appropriate?
The auditor should evaluate the control weakness over completeness of cash donations, perform extra procedures like observing collection box openings and tracing bank deposits, and then consider the effect on the opinion. Accepting totals blindly, excluding donations, or confirming with anonymous donors is inappropriate.
- AAccept the collection total as recorded since donations are voluntary and cannot be verified at all
- BEvaluate the weakness in controls over completeness of cash donations, perform additional procedures such as reviewing the opening of collection boxes and bank deposit timing, and consider the effect on the audit opinionCorrect
- CExclude donations from the audit scope by agreement with the trustees
- DConfirm donations by writing to the anonymous donors
Explanation
Where completeness of donation income cannot be fully verified, the auditor evaluates internal control weaknesses, performs alternative procedures such as observing box openings and tracing deposits, and then considers whether limitation or qualification is needed. Accepting totals blindly or excluding donations by agreement is improper, and anonymous donors cannot be confirmed.
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