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AUE3761 TEST 3 2023 MEMO
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AUE3761 Test 3July 2023
SUGGESTED SOLUTION
General comments:
- Remember that the suggested solution is only a guideline. Read each answer
provided by the student carefully.
- If the student described it in a different manner, but it relates to a point provided in
the memorandum, please award the marks.
Required 1: Relevance and reliability of data used in analytical procedures. MARKS
References: ISAs 500 and 520 and Lessons 8.1, 9.1 and 9.3
The expected total associate expenses uses the following inputs:
Number of associate drivers (A) x Fixed rate amount (B) + Total revenue (C) x
Commission rate (D) + method of calculation (E) = Total associate expenses.
1. Number of associate drivers (A) ^
•Inspect the number of drivers linked to the billing system (controls were relied
upon). ✓^
• For a sample of drivers agree details to supporting documentation (associate
contracts). Or Agree the number of associate drivers to the navigation/ billing ✓^
systems.
2. Fixed rate (B) ^
• Inspect associate contracts/Taxi policy for the fixed rate amount. ✓^
3. Total revenue (C) ^
• Agree total revenue per the analytical calculation to the total revenue amount
in the financial records – this will be tested as part of revenue testing. ✓^
• Agree a sample of revenue transactions (associate trips) (accounting or
reporting system) to invoices/ the amount recorded on the billing system for ✓^
that trip (controls were relied upon).
4. Commission rate (D) ^
• Inspect associate contract/Taxi policy for the commission rate. ✓^
5. Method of calculation/ Total expected associate expense (E) ^
• Inspect associate contracts/ Taxi policy for confirmation that associate
expenses are calculate based on the formula of (A) x (B) + (C) x (D) ✓^
• Obtain the schedule of associate expenses paid from the operating expenses ✓^
general ledger and agree to the expected amount calculated
This is your calculation as the auditor so there is no need to reperform or
recalculate your own workpaper!
Available (8 x 1½ + 5 x ½) 14½
Maximum 9
1
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