Planning an ADA application
You are auditing Quick Technologies, Inc. (QTI). QTI is a manufacturer of various computer technologies and works hard on bringing new technologies to market. QTI has approximately 4,000 customers (some with multiple locations). On average, QTI sells its inventory every 45 days, and it takes approximately 33 days to collect receivables. QTI has also experienced a high degree of competitiveness and technological obsolescence. The company has found that the average product life is between 9 and 15 months.
a. Identify a potential application for ADA in the audit of QTI. Explain the account and the assertion(s) tested by the application.
b. What is the population being analysed and tested using ADA?
c. Is ADA being used as a risk assessment procedure or as a substantive test?
d. Explain the ADA application that is planned and how it will contribute to the evaluation of the assertion being audited. e. Explain the role of business acumen in the application of ADA.
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