Tutorial 8 - Audit Strategy

Question
The audit partner in charge of the audit of Big Transport Bhd (BTB) planned to
obtain evidence of BTB’s revenue recognition by relying on internal controls and
the use of analytical procedures, rather than any substantive tests of details. BTB
receives most transportation revenue in advance and records them in a deferred
revenue account under current liabilities. An appropriate amount of revenue is
credited to revenue account in the income statement (and debiting deferred
revenue account) when goods of BTB’s customers are transported. However,
during subsequent testing of internal controls, a significant number of instances
occurred where BTB recognises revenue immediately upon receiving the
advance payments from customers instead of when customers’ goods were
actually transported.

Required:
Discuss the type of strategy planned by the audit partner, and the
appropriateness of this strategy after the initial testing of controls.