ACCA · Question 18 · Audit Evidence

SECTION B - QUESTION 18

SCENARIO: GlobalTrade Logistics
You are the audit manager responsible for the audit of GlobalTrade Logistics, an international e-commerce fulfillment company, for the year ended 30 September 20X6. The draft financial statements show revenue of $150m, profit before tax of $12m, and total assets of $85m.

You are currently reviewing the audit strategy and designing substantive procedures for key areas:

1. Trade Receivables: The balance consists of a high volume of small balances from individual online retailers, alongside five large corporate accounts which make up 40% of the total balance.
2. Revenue: Revenue is recognized in the system automatically when goods are dispatched from the warehouse. However, the company's standard terms and conditions state that the risk and rewards of ownership transfer to the customer only upon successful delivery.
3. Bank and Cash: GlobalTrade operates multiple bank accounts across three different countries in various foreign currencies to facilitate international trade.

REQUIREMENTS:
Describe substantive audit procedures the auditor should perform to obtain sufficient and appropriate audit evidence in relation to:
(a) Trade Receivables (8 marks)
(b) Revenue (7 marks)
(c) Bank and Cash (5 marks)