SECTION A - CASE 3: HARVESTYIELD AGRITECH
HarvestYield AgriTech manufactures smart farming equipment. You are auditing the financial statements for the year ended 31 December 20X6. The company recently introduced a new line of AI-driven tractors, making older models potentially obsolete. Inventory is held at 15 different regional depots. The company uses a bespoke computerized inventory system. You are planning the inventory count attendance and the substantive testing of receivables, as several farming clients have requested extended payment terms due to a poor harvest season.
Which of the following financial statement assertions is most at risk regarding the older models of tractors held in inventory?
ACCA · Question 13 · Audit Evidence
SECTION A - CASE 3: HARVESTYIELD AGRITECH
HarvestYield AgriTech manufactures smart farming equipment. You are auditing the financial statements for the year ended 31 December 20X6. The company recently introduced a new line of AI-driven tractors, making older models potentially obsolete. Inventory is held at 15 different regional depots. The company uses a bespoke computerized inventory system. You are planning the inventory count attendance and the substantive testing of receivables, as several farming clients have requested extended payment terms due to a poor harvest season.
When performing a receivables circularization (confirmation), which of the following provides the most reliable audit evidence?
Answer options:
A negative confirmation request where the customer does not reply.
A positive confirmation request returned to HarvestYield's finance director, who then forwards it to the auditor.
A positive confirmation request returned directly to the auditor indicating agreement with the balance.
An oral confirmation from the customer over the phone to the audit junior.
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