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CA Intermediate · Auditing and Ethics · Audit Evidence

While auditing Rohini Textiles Ltd, the auditor wants evidence that all goods dispatched during March have been invoiced. Which procedure best addresses this completeness assertion for sales?

The best procedure is to select goods dispatch notes and trace them to sales invoices and the sales register. Completeness requires testing from the source document to the records, so unrecorded dispatches are detected. Testing from the register to documents only checks that recorded sales really occurred.

  1. ATrace a sample of invoices from the sales register to the dispatch records
  2. BTrace a sample of goods dispatch notes to the related sales invoices and the sales registerCorrect
  3. CVouch a sample of sales register entries to customer purchase orders
  4. DConfirm year-end receivable balances directly with customers

Explanation

Completeness tests whether all dispatches were recorded, so the direction of testing must start from the source document (dispatch note) and go to the accounting record. Starting from the sales register, as in the first option, tests occurrence, not completeness. The third option also tests occurrence, and confirmation of receivables mainly tests existence of balances.

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