Golden Years Inc. owns and operates 20 rental retirement properties. It has a total of 9000 one-bedroom and 3000 two-bedroom rental units. Tenants pay rent monthly by giving a cheque to the property manager. The manager deposits the cheques at the nearest branch of Golden Years’ bank and sends the deposit information and tenant listing to Golden Years’ head office, where the accounting manager enters the information into the sales journal and general ledger. The Accounting Manager reconciles the bank statements monthly.
You are in charge of auditing Golden Years’ revenues and receivables for its 20X3 year-end. Golden Years’s draft financial statements report rental revenues of $102.6 million, tenant receivables of $400,000, and net income is $5.9 million.

a. Indicate whether you would use a substantive or combined approach to audit Golden Years’s revenues, giving your reasons.
b. Develop an audit program (list of audit procedures) to provide sufficient appropriate evidence that the rental revenues reported in the company’s 20X3 financial statements are not materially misstated.

  • CreatedJanuary 09, 2015
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