Question 1

SECTION A - CASE 3: AQUAPURE UTILITIES

AquaPure Utilities is a highly regulated public utility company managing water and waste services. You are auditing the financial statements for the year ended 31 March 20X6.

During the audit, you note the following:
1. AquaPure has a large internal audit (IA) department that recently completed a review of the procurement controls.
2. The billing system is highly automated, generating millions of micro-invoices based on smart meter readings.
3. The company owns a vast network of underground water pipes, which are difficult to physically verify.
4. You plan to use substantive analytical procedures to audit water revenue.

Question:
Regarding the existence of the underground water pipes, which of the following provides the most reliable audit evidence?

Accepted Answer

Apply the rules of evidence reliability: External > Internal; Direct > Indirect; Documented > Oral. Third-party video footage is external and direct physical evidence.

Question 2

What mistakes do candidates make on this ACCA question?

Accepted Answer

Choosing invoices (Option B) - while external, they are historical and do not prove current existence. Choosing the Fixed Asset Register (Option D) - this is just a list, not proof of existence.

How to approach this question

Full Answer

Common mistakes

Practice the full ACCA AA — Audit and Assurance Practice Exam 5

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