ACCA Audit and Assurance (F8) Practice Exam

Which procedure verifies the accuracy of the receivable balances?

1. Follow up on balance disagreements

2. Obtain bank confirmation letters

3. Review board minutes for receivable evidence

4. Analyze turnover ratios

The correct answer is: Follow up on balance disagreements

Following up on balance disagreements is a key procedure for verifying the accuracy of receivable balances. This process involves communicating with clients or customers to confirm that the amounts they acknowledge as owed to the company align with the amounts recorded in the company's financial statements. When there are discrepancies, further investigation is warranted to resolve the differences, which can help identify errors or fraud, thereby ensuring that the reported balances accurately reflect the expected receipts. Engaging with customers provides the most direct evidence regarding the existence and completeness of the receivables. It allows auditors to confirm that the amounts recorded are appropriate and helps build assurance that the financial statements present a true and fair view of the company's financial position. The other options, while relevant in different contexts, do not directly support the verification of receivable balances. Obtaining bank confirmation letters primarily focuses on cash balances rather than accounts receivable. Reviewing board minutes might provide some context around the management's decisions regarding revenue, but it typically wouldn’t confirm the individual balances. Lastly, analyzing turnover ratios can provide insights into the efficiency of collecting receivables but does not provide definitive evidence of the accuracy of the actual receivable balances. Thus, following up on balance disagreements is the most effective approach for verifying the accuracy of receivable balances.