How do you test the completeness assertion for revenue?
A core Audit & Assurance interview question — asked in analyst and associate interviews across IB, PE, and the Big 4.
THE SHORT ANSWER
To test completeness, I would start with understanding the revenue cycle and controls. I would select a sample of shipping documents and match them to sales invoices and recorded revenue entries. I would also perform analytical procedures comparing recorded revenue to expected revenue based on industry trends and historical data. Additionally, I would review subsequent cash receipts and credit notes to identify any unrecorded revenue.
WHAT INTERVIEWERS LISTEN FOR
- ✓Use of shipping documents to trace to recorded revenue.
- ✓Analytical procedures for reasonableness.
- ✓Review of subsequent cash receipts and credit notes.
COMMON MISTAKES
- ✗Only testing occurrence (vouching from records to supporting documents).
- ✗Ignoring subsequent events.
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