CPA Exam — AUDPerforming Further Procedures and Obtaining EvidenceMedium
An auditor is performing substantive procedures on the revenue cycle of a client that operates a subscription-based software service. The auditor selects a sample of customers from the billing system's active subscriber list and traces these to recorded revenue in the general ledger. Which assertion is the auditor primarily testing?
- ACutoff
- BCompleteness
- COccurrence
- DAccuracy
Show answer & explanationAnswer & explanation
Correct answer: B. Completeness
Tracing from a source document (active subscriber list) to a destination (general ledger) is a classic test for completeness. The auditor is trying to ensure that all legitimate subscribers have been recorded as revenue.
Why the other options are wrong
- A. Cutoff tests whether transactions are recorded in the correct accounting period.
- C. Occurrence tests if recorded transactions actually happened, typically by vouching from the general ledger back to source documents.
- D. Accuracy tests whether amounts are recorded correctly, which might be a secondary objective but not the primary one for tracing from a source list.
Completeness Assertion
The completeness assertion states that all transactions and events that should have been recorded have been recorded, and all assets, liabilities, and equity interests that should have been included in the financial statements have been included.
- Tests for completeness typically involve tracing from a source document or population to the accounting records.
- A common risk for completeness is unrecorded liabilities or revenues.
- Examples include tracing shipping documents to sales invoices, or purchase orders to accounts payable.
Memory trick: COMPLETE records mean NOTHING is MISSED from START to END.