ACCA Audit and Assurance (F8) Practice Exam

What is a key audit procedure to ensure the "Completeness" of receivables?

1. Perform receivable confirmations

2. Reconcile balances from sales ledger to a list of balances

3. Review bank confirmation letters

4. Examine large customer accounts individually

The correct answer is: Reconcile balances from sales ledger to a list of balances

Ensuring the completeness of receivables is crucial in an audit because it involves confirming that all transactions have been recorded and that no receivables have been omitted. Reconciling balances from the sales ledger to a list of balances is an effective key audit procedure for establishing completeness. This process involves comparing the recorded amounts in the sales ledger, which contains a detailed record of individual customer transactions, with a compiled list of all outstanding customer balances. By performing this reconciliation, auditors are able to identify any discrepancies that may indicate missing transactions or unrecorded receivables. For instance, if certain balances appear on the list of balances but are not reflected in the sales ledger, it suggests that these receivables have not been included in the financial records. This step is essential in assuring that the financial statements present a true and fair view of the company's financial position, particularly concerning amounts due from customers. Other procedures, such as performing receivable confirmations, can test existence and accuracy but may not address the completeness aspect directly. Similarly, reviewing bank confirmation letters and examining large customer accounts individually serve different purposes within the audit. While they provide useful insights, they are not as directly aligned with ensuring that all receivables have been recorded as the reconciliation of the