ACCA Audit and Assurance (F8) Practice Exam

What does the audit procedure involving casting the list of balances ensure?

1. The precision of sales ledger balances

2. The proper posting of invoices

3. Management's intent regarding sales

4. The sufficiency of receivable allowances

The correct answer is: The precision of sales ledger balances

Casting the list of balances refers to the process of adding up the figures in a schedule, such as a sales ledger or accounts receivable, to verify that the total is accurate and matches the expected total from the accounting records. This procedure helps ensure the precision of sales ledger balances by confirming that each individual entry has been accurately added, thus providing assurance that the balances reflect the true amounts owed by customers. By performing this audit procedure, auditors can identify any discrepancies that may arise from errors in addition, mispostings, or incomplete data. It plays a critical role in verifying the completeness and accuracy of the financial statements, especially the accounts receivable section, as errors in these balances could lead to misleading information about the entity's financial position. Although verifying the proper posting of invoices, management's intent regarding sales, and the sufficiency of receivable allowances are important aspects of an audit, they do not specifically relate to the casting of balances. This procedure is distinct in its focus on accuracy through mathematical confirmation, which is vital for establishing credible financial records.