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ACCA Strategic Professional · Advanced Audit and Assurance (International) · Audit procedures and obtaining evidence

Delmar Retail has 400,000 journal entries for the year. The audit team uses data analytics to scan the full population and filter entries posted on public holidays, by senior management, with round-number amounts and with no description. Which statement best describes the nature of this procedure?

The procedure tests the entire population of journals to isolate unusual or high-risk entries, such as round amounts or holiday postings. It does not by itself conclude on them; the auditor must follow up flagged items with supporting evidence, so it does not remove document inspection.

  1. AIt is a test of the whole population used to identify unusual items for further investigation, and the flagged entries still require follow-up evidenceCorrect
  2. BIt is a substantive analytical procedure that removes the need to inspect any supporting documents
  3. CIt is a test of controls that only provides evidence about operating effectiveness in the following year
  4. DIt is audit sampling because only entries with risk characteristics are examined

Explanation

Scanning the full population with filters identifies high-risk or unusual journals, but the flagged items must then be investigated by inspecting support and enquiry. It is not sampling because every entry is screened, and it does not replace obtaining evidence about the flagged items.

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