61-80 Flashcards
Procedures for gathering evidence
AEIOR
Analytical procedures
Enquiry
Inspection
Observation
Recalculate/ Reperformance
Analytical procedures done at 3 stages
- Planning stage
- Substantive procedure
- Final review
Audit evidence should be
- Sufficient ( quantity)
- Appropriate ( quality) (relevance and reliability)
Audit sampling includes
- Sample design
- Sample size
- Sample selection
- Perform audit procedures
- Evaluate sample results
Selection method
- Random
- Stratified
- Systematic
- Block
- Haphazard
- Monetary unit
- Value weighted
Recording client’s accounting system
- Narrative notes
- Flow harts
- ICQ ICEQ
Components of IC
- Control env
- Control act
- Information system
- Monitoring activities
- Risk assessment processes
Examples of control activities
- Verification
- Authorisation and approval
- Physical controls
- Reconciliation
- Segregation of duties
Inherent limitaions of IC
- Human errors
- Management overrides
- Collusion
- Non routine transaction
- Cost>benefit
Management letters/ letters of weakness
Significant control deficiency must be communicated to mngmt/ TCWG
Purchase system
The order
Ordering->receiving goods->receiving invoice->payment
Requisition form, purchase order, invoice, GRN
Controls
1. Ordered when needed
2. Ordered at competitive prices, quality, req quantity
3. Ordered from authorised suppliers
4. Booked into inventory
5. Inventory entered into invoices
6. Invoices checked with PO, goods received notes
7. Payment to suppliers
Sales system ic
The order
Order received->GDN-> invoice raised->payment received
Controls
1. Order accepted from credit worthy customers
2. Credit control on longstanding receivables
3. Invoice entered to receivables
4. Goods received by cutomers
5. Ordered goods are dispatched
6. All deliveries are promptly invoiced
7. Receipts front custoners are recorded
Payment system
Joiners, wages and salaries, leavers
Controls
1. Employees are hired only when necessary
2. Paid correct rates
3. Hours recorded accurately
4. Overtime authorised
5. Net pay and deductions calculated accurately
6. Payemnts done correctly
7. Leavers removed from the system
Inventory systme
Receive goods, store goods, dispatch goods
1. Goods cannot be misappropriated
2. Goods cannot be damaged
3. Obsolete/ slow moving goods should be identified
4. Valued at lower of cost and net realisable inventory
5. Goods are dispatched with approval
6, appropriate cut off
7. Inventory records are complete and accurate
Cash system ic
Receive cash, hold/bank, payment
Controls
1. All receipts recorded properly
2. All payments are recorded properly
3. Payment only after authorisation
4. Cash held securely
5. Cash banked promptly
