AUE3761
EXAM PACK
,THE AUDIT PROCESS - AUE3761
SELF-ASSESSMENT - JULY 2026
EXAM ANSWERS
QUESTION 1
1.1 Inventory
Account
Assertion Risks of material misstatement at assertion level
balance
There is a risk that inventory recorded in the accounting
records does not physically exist. QMP did not perform a
physical year-end inventory count and relies entirely on
quantities generated by VoltMindiq. In addition, small,
Inventory Existence
high-demand items such as power banks and earphones
are vulnerable to theft or forced access at public
locations. Some accessories may also have been
damaged by overheating lockers.
There is a risk that all inventory held by QMP has not
been recorded in the accounting records. Accessories
are held both inside dispensing compartments and in site
refill boxes, creating a risk that stock held at refill
Inventory Completeness
locations is omitted. Inventory movements may also be
incomplete where transactions or movements occurred
during connectivity interruptions and were subsequently
synchronised.
There is a risk that the quantities and monetary amounts
Inventory Accuracy recorded for inventory are inaccurate. VoltMindiq
quantities may not agree with actual quantities because
, no physical count was conducted. Errors may also arise
from incorrect product codes, quantities or selling prices
being entered or updated on the system.
Inventory may be overstated because damaged,
defective, counterfeit or slow-moving items may not have
been written down appropriately. In particular, some
power banks and earphones may be defective or
Valuation and
Inventory counterfeit, while older lockers may have damaged
allocation
accessories through overheating. Slow-moving goods are
sometimes discounted, but management does not
separately assess whether their carrying amount exceeds
net realisable value.
The bulk purchase of 2 000 power banks at a significantly
reduced price creates a risk that the goods have been
Valuation and incorrectly valued if they are counterfeit, defective or
Inventory
allocation cannot be sold at their expected selling price. Their
recoverable amount may therefore be lower than their
recorded cost.
Because the inventory is located in unsecured or publicly
accessible environments and the lockers are not insured
Inventory Existence against theft or damage, there is an increased risk that
recorded quantities include goods that have been stolen
or damaged but remain in the accounting records.
Manual transfer of monthly totals from VoltMindiq into the
accounting system creates a risk that inventory
Completeness purchases, sales and movements are omitted, duplicated
Inventory
and accuracy or incorrectly captured. This is particularly relevant
because VoltMindiq is not integrated with the accounting
system.
Explanation
, The principal inventory risks arise from the absence of a physical count, the
decentralised storage of accessories, the possibility of theft and damage, connectivity
problems, and the manual transfer of information from VoltMindiq into the accounting
system. The valuation risk is particularly significant because QMP has potentially
defective or counterfeit power banks and does not perform a formal net realisable value
assessment of slow-moving stock.
QUESTION 2
2. Formulate substantive audit procedures using CAATs only for revenue
The audit team should use computer-assisted audit techniques (CAATs) to analyse the
complete VoltMindiq revenue population for the year ended 28 February 2026. The
following procedures should be performed:
1. Recalculate revenue electronically by multiplying the quantity sold by the
applicable unit selling price for every transaction and comparing the recalculated
amount with the recorded total sales amount. Investigate all differences.
2. Recalculate discounted transactions by independently determining the
expected discounted selling price and comparing it with the discounted price
recorded in VoltMindiq. Investigate transactions where the discount appears
excessive, mathematically incorrect or inconsistent with the applicable price.
3. Test transaction-ID sequencing by analysing all transaction IDs for gaps,
missing numbers and unusual breaks in the sequence. Investigate gaps to
determine whether transactions may have been omitted from the revenue
records.
4. Identify duplicate transaction IDs using the CAAT software. Duplicate IDs
could indicate duplicated transactions or data-processing errors that could result
in revenue being overstated.
5. Analyse transactions by transaction date and isolate transactions recorded
outside the financial year, particularly those immediately before and after 28
February 2026. This will assist in identifying revenue cut-off errors.
EXAM PACK
,THE AUDIT PROCESS - AUE3761
SELF-ASSESSMENT - JULY 2026
EXAM ANSWERS
QUESTION 1
1.1 Inventory
Account
Assertion Risks of material misstatement at assertion level
balance
There is a risk that inventory recorded in the accounting
records does not physically exist. QMP did not perform a
physical year-end inventory count and relies entirely on
quantities generated by VoltMindiq. In addition, small,
Inventory Existence
high-demand items such as power banks and earphones
are vulnerable to theft or forced access at public
locations. Some accessories may also have been
damaged by overheating lockers.
There is a risk that all inventory held by QMP has not
been recorded in the accounting records. Accessories
are held both inside dispensing compartments and in site
refill boxes, creating a risk that stock held at refill
Inventory Completeness
locations is omitted. Inventory movements may also be
incomplete where transactions or movements occurred
during connectivity interruptions and were subsequently
synchronised.
There is a risk that the quantities and monetary amounts
Inventory Accuracy recorded for inventory are inaccurate. VoltMindiq
quantities may not agree with actual quantities because
, no physical count was conducted. Errors may also arise
from incorrect product codes, quantities or selling prices
being entered or updated on the system.
Inventory may be overstated because damaged,
defective, counterfeit or slow-moving items may not have
been written down appropriately. In particular, some
power banks and earphones may be defective or
Valuation and
Inventory counterfeit, while older lockers may have damaged
allocation
accessories through overheating. Slow-moving goods are
sometimes discounted, but management does not
separately assess whether their carrying amount exceeds
net realisable value.
The bulk purchase of 2 000 power banks at a significantly
reduced price creates a risk that the goods have been
Valuation and incorrectly valued if they are counterfeit, defective or
Inventory
allocation cannot be sold at their expected selling price. Their
recoverable amount may therefore be lower than their
recorded cost.
Because the inventory is located in unsecured or publicly
accessible environments and the lockers are not insured
Inventory Existence against theft or damage, there is an increased risk that
recorded quantities include goods that have been stolen
or damaged but remain in the accounting records.
Manual transfer of monthly totals from VoltMindiq into the
accounting system creates a risk that inventory
Completeness purchases, sales and movements are omitted, duplicated
Inventory
and accuracy or incorrectly captured. This is particularly relevant
because VoltMindiq is not integrated with the accounting
system.
Explanation
, The principal inventory risks arise from the absence of a physical count, the
decentralised storage of accessories, the possibility of theft and damage, connectivity
problems, and the manual transfer of information from VoltMindiq into the accounting
system. The valuation risk is particularly significant because QMP has potentially
defective or counterfeit power banks and does not perform a formal net realisable value
assessment of slow-moving stock.
QUESTION 2
2. Formulate substantive audit procedures using CAATs only for revenue
The audit team should use computer-assisted audit techniques (CAATs) to analyse the
complete VoltMindiq revenue population for the year ended 28 February 2026. The
following procedures should be performed:
1. Recalculate revenue electronically by multiplying the quantity sold by the
applicable unit selling price for every transaction and comparing the recalculated
amount with the recorded total sales amount. Investigate all differences.
2. Recalculate discounted transactions by independently determining the
expected discounted selling price and comparing it with the discounted price
recorded in VoltMindiq. Investigate transactions where the discount appears
excessive, mathematically incorrect or inconsistent with the applicable price.
3. Test transaction-ID sequencing by analysing all transaction IDs for gaps,
missing numbers and unusual breaks in the sequence. Investigate gaps to
determine whether transactions may have been omitted from the revenue
records.
4. Identify duplicate transaction IDs using the CAAT software. Duplicate IDs
could indicate duplicated transactions or data-processing errors that could result
in revenue being overstated.
5. Analyse transactions by transaction date and isolate transactions recorded
outside the financial year, particularly those immediately before and after 28
February 2026. This will assist in identifying revenue cut-off errors.
