What audit procedure do you carry out to check existence ?
Physical verification of assets
What audit procedure do you carry out to check rights and obligations ?
Title deeds for property
Vehicle reg documents
Share certificates
Purchase invoices
What audit procedure do you carry out to check completeness ?
Trace a sample of assets seen in use to the asset register
What audit procedure do you carry out to check valuation ?
Inspect purchase invoices
Inspect surveyors report
Recalculate the assets yourself
Why is inventory so significant?
It can be highly material
Valuation can be subjective
Impacts both statements
Theft
Formula for inventory ?
Quantity x value = inventory
What do you do before inventory count?
Review locations and count instructions
Consider whether expert help is required
Review systems of control and internal audit arrangements
Arrange to verify any inventory held at third party premises
What do you do during the inventory count?
Observe counts
Check cut off arrangements
Keep inventory kept in third party separate from the clients inventory
Perform two way test counts
Identify any slow moving or old inventory
How would you test for existence of inventories?
Take sample of the items and agree to the number of items in the warehouse
How would you test for rights and obligations of inventories ?
Seek confirmation from third parties about inventory held
How would you test for completeness of inventories ?
Take sample of items then agree to client count sheets
How would you test for valuation of inventories ?
Agree material costs to invoice
Agree labour costs to payroll
How would you test for existence of trade receivables ?
Obtain direct confirmation
How would you test for valuation of bank reconciliation ?
Cross checking with bank statements
How would you test for rights and obligations of bank reconciliation ?
Confirm bank balances
How would you test for existence of bank reconciliation ?
Confirm material cash
Check bank balance
What is the key financial statement assertion?
Completeness
What are tests of detail?
Tracing transactions from the source documents to the trial balance
Which matters should be referred to a senior member of staff?
Conclusions
Exceptional items
Unusual accounting entries
Indications of possible money laundering
Issues requiring further discussions with the client
