Evaluation 3 - Chapters 6-8 (20%)

Learning Outcome 4: Develop and utilize procedures for assurance engagements

Scenario[1]

Active Living Inc. has been in operation in Regina since early 2000, and now owns and operates 50 rental retirement properties across Saskatchewan and Manitoba. It has a total of 8,000 one-bedroom and 4,000 two-bedroom rental units. Tenants pay rent monthly by giving a cheque to their respective property manager. The manager deposits the cheques at the bank and sends the deposit information and tenant listing to Active Living's 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 a junior Auditor at Audit Compilation Corporation and have been asked to audit Active Living's revenues and receivables for its 2021 year-end. Active Living's draft financial statements report rental revenues of $106.2M, tenant receivables of $451,000, and net income of $7.9M.

Task 1

Draw a simple flowchart of the procedures, described in the scenario. Appendix 2 includes the common flow chart symbols. You may use digital resources like MS Visio, LucidChart, and Creately to create the flowchart or you may draw one but it must be scanned to be submitted via Moodle Drop Box.

Include 2-3 sentences indicating if there are any concerns you have with procedures or controls, if there are no concerns be sure to document this as well.

Task 2

In 2-3 sentences, indicate whether you would use a substantive or a combined approach to audit Active Living's revenues, and include your reasons for this decision.

Task 3

Using, the template in Appendix 1 list 5 audit procedures to provide sufficient appropriate evidence that the rental revenues or receivables in the company's 2021 financial statements are not materially misstated.

Submission

When submitting to Moodle, you should be submitting a Word document which will include Task 2 and 3, and one other attachment that includes the simple flow chart.

Appendix 1 - Audit Program Template

Describe audit procedure	Type of Evidence	Assertion Addressed	Timing (when does this occur, e.g. phase of audit, or time of year)	Method (manual vs digital)	Extent, if relevant e.g. sampling or all

Appendix 2 - Standard Flowchart Symbols[2]

Basic - EmC Input/output Process Flowline Annotation Additional C) ( > *O Start/Stop Inconnector (entrance) Outconnector (exit) (program Terminator) Specialized for Media SQ - Document (report) Magnetic tape Card Paper tape (mark sense, punch) Specialized for Equipment 6; Display Manual input online Telecommunication Online storage (keyboard, barcode reader) link Magnetic disk Offline storage (manually maintained data file) Specialized for Processing OIE'I Decision Preparation Predefined process Manual offline Auxiliary offline (subroutine) operation operation