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Donald Trump and Boris Johnson are discussing the audit program for the revenue account. Donald and...

Donald Trump and Boris Johnson are discussing the audit program for the revenue account. Donald and Boris disagree about whether they should use procedure A or B below to test the occurrence assertion for the revenue account: A. Select a sample of sales from the sales journal and agree the details in the journal to the sales invoices, delivery dockets and customer orders. B. Select a sample of sales invoices, delivery dockets and customer orders and agree the details to the details recorded in the sales journal. Required Which test provides evidence about the occurrence assertion? Why? Which assertion does the other test provide evidence about?

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Answer #1

The occurrence assertion is tested by selecting a sample of items in the accounting records and agreeing the details to the underlying documents. The test answers the question: Did this item shown in the accounts actually occur? This is because the test gathers evidence from the documents about the item in the accounts.

Test A addresses the occurrence assertion.

The completeness assertion is tested by selecting a sample of documents and agreeing the details to the accounting records. The test answers the question: Are the accounting records complete? That is, do they include this transaction? This is because the test gathers evidence about the completeness of the accounting records by testing if the transactions in the documents were entered into the accounting records correctly.

Test B addresses the completeness assertion.

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