External audit: investigate a receivables sample
You are auditing a fictional distributor at year-end. A selected receivables sample has subsequent cash receipts and recovery evidence. Calculate coverage, identify the proposed adjustment and evaluate its significance without projecting a sample error automatically.
Original Finance Circle audit case with fictional receivables and evidence. RBC’s published independent auditor’s report is background reading, not the source of these sample records.
Independent Finance Circle learning material. The source organisation does not sponsor, author or endorse this exercise.
Clarify. Structure. Calculate. Defend.
Take 2 minutes to clarify the decision and definitions, 3 minutes to structure the analysis, then work the exhibits. Finish with a concise recommendation and answer a follow-up. The time is a suggested practice format, not an employer requirement.
Clarify before solving
What are the data basis and reporting boundary?
Original Finance Circle audit case with fictional receivables and evidence. RBC’s published independent auditor’s report is background reading, not the source of these sample records.
Which assumptions can I use without requesting more data?
CAD thousands. Subsequent receipts relate to the selected year-end balances. For this exercise, all unpaid amounts are recoverable except 80 on customer D. No opening allowance is recorded for D.
What decision am I expected to support?
Express the 80 proposed adjustment as a percentage of overall and performance materiality.
Build your structure
- Selected balances, year-end scope and assertions
- Subsequent receipts and other recovery evidence
- Supported allowance and adjustment
- Materiality, sample limits and escalation
Use the branches that matter to this decision. A memorised framework is less useful than explaining why each analysis could change your recommendation.
Everything you need to work the case.
Assumptions & boundaries
- CAD thousands. Subsequent receipts relate to the selected year-end balances.
- For this exercise, all unpaid amounts are recoverable except 80 on customer D. No opening allowance is recorded for D.
- Overall materiality is 50 and performance materiality is 35, both case assumptions. This is a judgement exercise, not a complete audit opinion.
Selected year-end receivables
| Customer | Balance | Subsequent cash | Other recovery evidence |
|---|---|---|---|
| A | 300 | 300 | None needed |
| B | 250 | 200 | Remaining 50 recoverable |
| C | 200 | 150 | Remaining 50 recoverable |
| D | 250 | 100 | Only 70 of remaining 150 recoverable |
Choose the responsibility. Solve the decision.
Each level uses the exhibits above and asks a different question. Your entries stay in this open page only; copy your work before leaving.
Reconcile sample coverage.
Calculate total selected balances, total subsequent cash and cash coverage.
Is all unpaid receivables value a proposed loss?
Numerical checks compare your arithmetic with the case model. Written recommendations are self-practice and are not automatically graded.
03 · Reveal worked solution & decision guide
Expected numerical answers
- Selected balance
- 1,000 CAD thousand
- Subsequent cash
- 750 CAD thousand
- Cash coverage
- 75 %
Work through the calculation
- Balances = 300 + 250 + 200 + 250 = 1,000. Cash = 300 + 200 + 150 + 100 = 750.
- Coverage = 750 / 1,000 × 100 = 75%; unpaid total is 250.
A strong concise response
My calculation shows that selected balance is 1,000 CAD thousand; subsequent cash is 750 CAD thousand; cash coverage is 75 %. An unpaid balance is not automatically a misstatement. Inspect other evidence and consider collectibility and cut-off.
Answer the interviewer follow-up
Is all unpaid receivables value a proposed loss?
No. Subsequent cash is one form of evidence. The case supplies additional recovery evidence, so only the unsupported portion of D becomes the modelled allowance.
Assessment rubric · 20 points
For self-review or mentor discussion. This rubric is not an automated written-answer grade or an employer scoring system.
Correctly derives all 3 numerical results for this level, keeps signs and units consistent, and explains the method.
Explains the objective: Reconcile sample coverage. States the supplied scope, timing and metric definitions before calculating.
An unpaid balance is not automatically a misstatement. Inspect other evidence and consider collectibility and cut-off. Addresses the interviewer follow-up without contradicting the facts.
Leads with a clear conclusion, distinguishes facts from assumptions, and identifies the next evidence needed. Does not claim the source company asked or endorsed this question.
Use full precision until the final rounding. Alternative written recommendations may be reasonable if they respect the facts and explain assumptions. This is Finance Circle’s guide, not an official source-company answer.
Source & attribution
The references below identify the public reporting, hiring guidance, research or mock-interview material used for context. Finance Circle wrote the exercise and its answers. Illustrative figures are explicitly identified; they are not company results or findings.
Public context; Finance Circle’s scenario inputs are illustrative.
Source reviewed 30 October 2026. No external page is needed to answer this exercise. Company names and logos identify sources only. All trademarks belong to their respective owners.