Q.A partner of a trading firm suspects the firm's cashier has been misappropriating cash receipts over the past few months, but the partners do not want to bear the cost of auditing the firm's entire set of books. What kind of audit would you recommend, and why? (Supplementary practice content.)

When the concern is narrow and specific, the audit chosen for it should be narrow and specific too — there is no need to examine everything to investigate one suspected problem.

A Partial Audit, with its scope specifically confined to the firm's cash transactions (cash receipts and cash payments), is the appropriate recommendation for this situation.

As Section b explains, a Partial Audit is undertaken by specific agreement between the entity and the auditor to examine only a defined part of the accounts, rather than the entire set of books — this is exactly suited to a case like this one, where the partners' concern is narrow and specific (suspected cash misappropriation by the cashier) rather than a general doubt about the reliability of the firm's accounts as a whole. Since this is a partnership firm with no statutory audit requirement applying to it, there is no legal obstacle to choosing a Partial Audit rather than a Complete Audit — that restriction only applies where a Statutory Audit is legally required, which is not the case here. …

Students sometimes default to recommending a 'full audit' out of caution, even where the facts clearly call for a narrower, more cost-effective option. Where the given facts describe a specific, limited concern and an explicit wish to avoid the cost of a full audit, a Partial Audit is the more di …