ACCA · Question 18 · Audit evidence

SECTION B - CONSTRUCTED RESPONSE

Company: SwiftCargo Logistics
Year-end: 31 October 2026

You are the audit senior at TransportAudit LLP, auditing SwiftCargo Logistics, a major shipping and freight forwarding company. You are currently planning the substantive procedures for the following specific areas:

Area 1: Trade Receivables
SwiftCargo has a large number of corporate clients. Due to a recent economic downturn, several clients are taking longer to pay, and the allowance for receivables has increased significantly.

Area 2: Legal Claims Provision
During the year, a cargo ship encountered a severe storm, resulting in damage to several clients' goods. SwiftCargo is currently facing multiple legal claims for damages. Management has recognized a provision of $2.5 million.

Area 3: Additions to Property, Plant, and Equipment (PPE)
SwiftCargo purchased a new fleet of 50 delivery trucks during the year to expand its last-mile delivery network.

Required:
Describe substantive procedures the auditor should perform to obtain sufficient appropriate audit evidence in relation to:
(a) The VALUATION of Trade Receivables. (7 marks)
(b) The COMPLETENESS and VALUATION of the Legal Claims Provision. (7 marks)
(c) The EXISTENCE and VALUATION of the Additions to PPE (new fleet of trucks). (6 marks)