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ACCA · Question 11 · Audit Evidence

CASE SCENARIO: Global Freightways PLC
Global Freightways PLC is a cross-border logistics and shipping multinational. You are the audit senior for the year ended 31 March 20X7. The company has complex revenue recognition policies due to shipments spanning multiple accounting periods. Furthermore, they hold significant foreign currency bank accounts. Global Freightways relies heavily on a bespoke, automated IT system called 'Track-It' to record shipments, calculate freight charges, and generate invoices automatically based on weight and distance.

QUESTION:
You want to verify that the 'Track-It' system correctly calculates freight charges based on the company's complex pricing matrix. Which of the following Computer Assisted Audit Techniques (CAATs) would be most appropriate for this specific task?

Answer options:

A.

Audit Software to extract a sample of invoices for manual recalculation.

B.

Test Data

C.

Analytical Procedures on total revenue.

D.

Observation of the IT manager using the system.

How to approach this question

Differentiate between Audit Software (interrogating data) and Test Data (testing system logic/controls). To test a calculation *within* the system, use Test Data.

Full Answer

B.Test Data✓ Correct
Test data involves the auditor submitting 'dummy' data into the client's system to ensure that the system processes it correctly. By inputting various weights and distances (including edge cases), the auditor can verify if the 'Track-It' system's internal logic correctly applies the pricing matrix.

Common mistakes

Confusing Test Data with Audit Software. Audit software is used to analyze large volumes of existing client data (e.g., filtering, sorting). Test data tests the system's controls and processing logic.
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