audit procedures that you would perform regarding the reasonableness

Question 1

Obtain a cash flow forecast from management indicating expected cash flows for
FY2017 and

by enquiry from Dr Brown, ascertain the process followed to compile the forecast and
the identity of the persons involved;

Answer 1

evaluate the competence of those who prepared the forecast by –
enquiring as to their qualifications and experience; and
comparing the forecasts prepared by these individuals in prior years to the actual
results that materialized after year end

Question 2

evaluate the reasonableness of assumptions underlying the forecast, by discussion with
management and corroborate their responses by inspection of supporting documents
industry norms, approved policy etc.);

Answer 2

perform analytical procedures to compare the figures used in the forecast to the
comparable figures for FY2016;

inspect the minutes of the Council / Audit Committee meeting that the cash flow
forecast was evaluated for reasonableness, and approved as such by governing body.

Obtain the number of students expected for FY2017 (based on FY2016 figures) and
multiply this with the average tuition fee for FY2016. (With no increase) to assess the
reasonability.

Use this amount and multiply with historic payment % per month to determine the
reasonability of the inflows per month.

Inspect the forecast to ensure that the following have been taken into account:
adjustment of the overstatement in government subsidy, based on the error of R58
million;
cash outflows associated with legal claims against Uhesa.

Confirm the availability of loan and overdraft facilities with bankers and other credit
providers

Question 3

re-perform calculations to determine the mathematical accuracy of the forecast
(castings, calculations)

Answer 3

agree, by inspection, the data used in the preparation of the forecast to supporting
documents (e.g. audited figures in 2016 financial records);

Question 4

Inspect the minutes of the Council / Audit Committee meeting that the cash flow
forecast was evaluated for reasonableness, and approved as such by governing body

Answer 4

No salary increases

Discuss this with union representatives regarding their acceptance thereof /
inspect agreement with unions in this regard.

Question 5

Inspect the payroll for January 2017 to ensure no increases were EFFECTED

Answer 5

Inspect minutes of council meetings to verify the approval of no increases in
2017/2018

Question 6

Aggressive performance management scheme

Answer 6

Obtain the details of the additional cash inflows included in the forecast from the
commercial entities, and re-perform to check the clerical accuracy.

Question 7

By enquiry from the heads of these entities, and inspection of signed contracts,
ascertain the reasonableness of the amounts included in the forecast.

Answer 7

Inspect the forecast to ensure that the bonuses resulting from this additional revenue
have been correctly included as cash outflows in the forecast

Question 8

Prepayment of tuition discount scheme:

Answer 8

Discuss with the finance director the implementation of this, as well as cash generated
by the scheme, and compare to amounts included in the budget.

Question 9

Perform a student survey for a sample of students and determine the likelihood of them
taking up the discount offer

Answer 9

Identify any debtors at year end with credit balances. Through inspection of cash inflow
projections that these have not been budgeted for again

Question 10

Discuss with the operations directors the implementation of this, as well as the viability
thereof and potential cost savings.

Answer 10

Inspect documentation to support these cost cuts, such as cancellation of repair and
maintenance contracts with suppliers/contractors

Question 12

Inspect any contracts, etc. that Uhesa has already entered into regarding the sale of such
assets, and compare to the amounts that have been included in the budget

Answer 12

Request a written representation from management regarding the above plans for
future actions and the feasibility thereof (ISA 570.16(e)

Question 13

With permission of Uhesa, contact the university’s lawyers/legal counsel and enquire of
any litigation and claims for 2017 that need to be included in the cash flow forecast

Answer 13

Through discussion with management, consider any subsequent events after FY2016 that
would have an impact on the cash flows for 2017 and would need to be included in the
cash flow forecast.