ACCA Strategic Professional · Advanced Audit and Assurance (International) · Completion and final review
In the final stage of the audit of Boreal Foods, the auditor performs analytical procedures under ISA 520 as an overall review. Revenue rose 12% while trade receivables rose 40% and the receivables collection period lengthened sharply, with no explanation from management. What is the most appropriate response?
The auditor should investigate the unexplained disproportionate rise in receivables, because final analytical procedures can reveal a previously unrecognised risk of material misstatement. If one is found, the risk assessment and further audit procedures must be revised, not simply noted or left to management.
- AAccept the results, since overall review analytical procedures are not designed to identify risks that were missed
- BDocument the movement and conclude, because the final review is a presentation check only
- CInvestigate the unexplained fluctuation, which may indicate a previously unrecognised risk of material misstatement, and revise the assessment and further procedures if neededCorrect
- DAsk management to restate the receivables ledger without further audit work
Explanation
ISA 520 requires final analytical procedures to help form an overall conclusion on whether the financial statements are consistent with the auditor's understanding. If they identify a previously unrecognised risk, ISA 520 requires the auditor to revise the risk assessment and modify planned further procedures. Option A is wrong because identifying such risks is exactly what the final review can do.
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