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CA Intermediate · Auditing and Ethics · Audit Evidence

While auditing Kaveri Textiles Ltd, the auditor wants to confirm that all goods dispatched during March were actually billed. Which audit procedure gives the most relevant evidence for this completeness assertion?

The best procedure is tracing a sample of goods dispatch notes forward to sales invoices and the sales ledger. Testing from source documents to the records reveals dispatches that were never billed, addressing completeness. The reverse direction, from invoices to dispatch records, tests occurrence or existence instead.

  1. ATrace a sample of dispatch records (goods dispatch notes) to the related sales invoices and sales ledgerCorrect
  2. BTrace a sample of sales invoices to the related dispatch records
  3. CVouch a sample of sales ledger entries to bank receipts
  4. DInspect the closing inventory count sheets for cut-off marks

Explanation

For completeness of sales, the direction of testing is from the underlying source (dispatch records) to the accounting records, so unbilled dispatches are detected. Tracing invoices back to dispatch notes tests occurrence, not completeness, which is why option B is wrong.

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