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:
You are performing a substantive analytical procedure on water revenue. Which of the following represents the most robust predictive model for this procedure?

Accepted Answer

A robust substantive analytical procedure involves the auditor developing an independent expectation of a balance. Using non-financial data (gallons of water) multiplied by a known price (tariff) creates a strong expectation to compare against the client's recorded revenue.

Question 2

What mistakes do candidates make on this ACCA question?

Accepted Answer

Confusing basic analytical procedures (like comparing to prior year or trend analysis) with a 'predictive model' or 'proof in total'.

How to approach this question

Full Answer

Common mistakes

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

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