ACCA Audit and Assurance (F8) Practice Exam

Which of the following would likely trigger a follow-up procedure?

1. Disputes on the balance supplied by a customer

2. Early replies from customers

3. Confirmation replies from the majority of clients

4. No updates on the customer onboarding process

The correct answer is: Disputes on the balance supplied by a customer

A situation where there are disputes regarding the balance supplied by a customer indicates a potential discrepancy or misunderstanding that requires further investigation. When an auditor encounters such disputes, it is essential to conduct follow-up procedures to resolve the issues, ensure accuracy in the account balances, and maintain the integrity of the financial statements. This may involve additional communication with the customer, reviewing supporting documentation, or validating the transactions in question. Disputes can arise from various factors, such as incorrect invoicing, unrecorded transactions, or errors in data entry. Therefore, follow-up procedures in these scenarios not only clarify discrepancies but can also help the auditor assess the reliability of the information provided by the customer and the overall controls related to their accounts receivable. The remaining options represent less serious or more straightforward situations. Early replies from customers may indicate a strong relationship or good communication but do not necessitate further investigation. Confirmation replies from the majority of clients suggest sufficient evidence has been gathered, reducing the need for follow-ups. Lastly, a lack of updates on the customer onboarding process may warrant internal follow-up but does not directly relate to financial discrepancies that impact audit assurance.