Question

Magi Chen is the managing director of Sun Construction Pty Ltd, a family owned business that provides construction services. As Magi is interested in purchasing some new constructionequipment’s for her business, she has approached her local bank for finance. The bank has asked that Magi provide an audited financial statement to assist them in considering her loan application. Magi has approached your audit firm for this service and you have been allocated the task of auditing Sun Construction for the year ended 30 June 2019. You have undertaken a preliminary review of the business and determined that a substantive testing approach would be suitable and appropriate. You are currently preparing an audit program for the revenue cycle. The following information has been obtained from your review:

• Magi usually works 120 hours a fortnight. Part of this time is spent travelling between differentclients and is not charged to the clients. The remaining time is charged at $60 per hour, regardless of the task undertaken.

• Customers typically pay Magi in cash for the work undertaken, except for a small number ofregular small-business customers. Magi allows these customers to pay on account by bank transfer on a monthly basis.
• Magi supplies each cash customer with a written receipt, prepared manually from a receipt book purchased at the local news-agency. The book contains pre-numbered blank receipts, which are completed in duplicate.

Required:
For each of the assertions of occurrence, completeness and accuracy, identify a procedure(s) you

could use to audit Sun Construction's revenue.

Magi Chen is the managing director of Sun Construction Pty Ltd, a family owned business that provides construction services. As Magi is interested in purchasing some new constructionequipment’s for her business, she has approached her local bank for finance. The bank has asked that Magi provide an audited financial statement to assist them in considering her loan application. Magi has approached your audit firm for this service and you have been allocated the task of auditing Sun Construction for the year ended 30 June 2019. You have undertaken a preliminary review of the business and determined that a substantive testing approach would be suitable and appropriate. You are currently preparing an audit program for the revenue cycle. The following information has been obtained from your review:

• Magi usually works 120 hours a fortnight. Part of this time is spent travelling between differentclients and is not charged to the clients. The remaining time is charged at $60 per hour, regardless of the task undertaken.

• Customers typically pay Magi in cash for the work undertaken, except for a small number ofregular small-business customers. Magi allows these customers to pay on account by bank transfer on a monthly basis.
• Magi supplies each cash customer with a written receipt, prepared manually from a receipt book purchased at the local news-agency. The book contains pre-numbered blank receipts, which are completed in duplicate.

Required:
For each of the assertions of occurrence, completeness and accuracy, identify a procedure(s) you

could use to audit Sun Construction's revenue.

Magi Chen is the managing director of Sun Construction Pty Ltd, a family owned business that provides construction services. As Magi is interested in purchasing some new constructionequipment’s for her business, she has approached her local bank for finance. The bank has asked that Magi provide an audited financial statement to assist them in considering her loan application. Magi has approached your audit firm for this service and you have been allocated the task of auditing Sun Construction for the year ended 30 June 2019. You have undertaken a preliminary review of the business and determined that a substantive testing approach would be suitable and appropriate. You are currently preparing an audit program for the revenue cycle. The following information has been obtained from your review:

• Magi usually works 120 hours a fortnight. Part of this time is spent travelling between differentclients and is not charged to the clients. The remaining time is charged at $60 per hour, regardless of the task undertaken.

• Customers typically pay Magi in cash for the work undertaken, except for a small number ofregular small-business customers. Magi allows these customers to pay on account by bank transfer on a monthly basis.
• Magi supplies each cash customer with a written receipt, prepared manually from a receipt book purchased at the local news-agency. The book contains pre-numbered blank receipts, which are completed in duplicate.

Required:
For each of the assertions of occurrence, completeness and accuracy, identify a procedure(s) you

could use to audit Sun Construction's revenue.

Magi Chen is the managing director of Sun Construction Pty Ltd, a family owned business that provides construction services. As Magi is interested in purchasing some new constructionequipment’s for her business, she has approached her local bank for finance. The bank has asked that Magi provide an audited financial statement to assist them in considering her loan application. Magi has approached your audit firm for this service and you have been allocated the task of auditing Sun Construction for the year ended 30 June 2019. You have undertaken a preliminary review of the business and determined that a substantive testing approach would be suitable and appropriate. You are currently preparing an audit program for the revenue cycle. The following information has been obtained from your review:

• Magi usually works 120 hours a fortnight. Part of this time is spent travelling between differentclients and is not charged to the clients. The remaining time is charged at $60 per hour, regardless of the task undertaken.

• Customers typically pay Magi in cash for the work undertaken, except for a small number ofregular small-business customers. Magi allows these customers to pay on account by bank transfer on a monthly basis.
• Magi supplies each cash customer with a written receipt, prepared manually from a receipt book purchased at the local news-agency. The book contains pre-numbered blank receipts, which are completed in duplicate.

Required:
For each of the assertions of occurrence, completeness and accuracy, identify a procedure(s) you

could use to audit Sun Construction's revenue.

Answer 1

Audit assertions for cash
Existence	Cash balances on the balance sheet really exist at the reporting date.Make surprise check of Cash balance & should tally with books .There should not be any missing duplicate receipt.It may be Implement a system of account payment.
Completeness	Cash balances include all cash transactions that have occurred during the accounting period.Check each individual transaction of bill issued tally with cash receipt and recorded in books of accounts.Make sure no missing duplicate copy of receipt.
Rights and obligations	Organisation has title to the cash accounts as of the reporting date.
Valuation or allocation	The recorded balances reflect the true underlying economic value of the cash and cash equivalents.
Presentation and disclosure	Cash is properly classified on the balance sheet and adequate disclosure has been made in the notes to the financial statements.
Accuracy	There should be proper internal control to record the transaction & proper physical control of cash.