ExpertACCA · Question 15 · Audit Evidence
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:
- AquaPure has a large internal audit (IA) department that recently completed a review of the procurement controls.
- The billing system is highly automated, generating millions of micro-invoices based on smart meter readings.
- The company owns a vast network of underground water pipes, which are difficult to physically verify.
- You plan to use substantive analytical procedures to audit water revenue.
Question:
You are performing a substantive analytical procedure on water revenue. Which of the following represents the most robust predictive model for this procedure?
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:
- AquaPure has a large internal audit (IA) department that recently completed a review of the procurement controls.
- The billing system is highly automated, generating millions of micro-invoices based on smart meter readings.
- The company owns a vast network of underground water pipes, which are difficult to physically verify.
- You plan to use substantive analytical procedures to audit water revenue.
Question:
You are performing a substantive analytical procedure on water revenue. Which of the following represents the most robust predictive model for this procedure?
Answer options:
Comparing this year's total revenue to last year's total revenue and investigating any variance over 5%.
Multiplying the total volume of water supplied (from independent reservoir outflow meters) by the standard regulated tariff rate.
Calculating the gross profit margin and comparing it to industry averages.
Reviewing the monthly revenue trend line for unusual spikes or dips.
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