Frm Revision Mock Flashcards
Example of substantive testing for bank reconciliation
Obtain company bank account reconciliation and cast to check the additions to ensure arithmetical accuracy.
Agree the balance per the bank reconciliation to an original year-end bank
statement and to the bank confirmation letter.
Trace all the outstanding lodgements to the pre year-end cash book, post year-end
bank statement and also to paying-in-book pre year end.
Trace all unpresented cheques through to a pre year-end cash book and post yearend statement. For any unusual amounts or significant delays, obtain explanations
from management.
Examine any old unpresented cheques to assess if they need to be written back
into the purchase ledger as they are no longer valid to be presented.
Identify and explain THREE quality control procedures that should be in place in relation to the performance of the Eagle Heating Co audit.
Generic Answers
Direction: The audit should be planned and audit staff briefed on their responsibilities within the audit team.
Supervision: Audit staff will be responsible for supervising more junior staff, ensuring
they understand what is required of them, informing them of audit risks, materiality and any particular factors relating to the client, being prepared to answer queries.
Review: Senior audit staff will review the work of more junior members to ensure it is in line with the audit plan and that sufficient appropriate evidence has been obtained and documented.
Explain why it is important that auditors communicate throughout the audit with those charged with governance;
Describe THREE examples of matters that the auditors may communicate to those charged with governance.
-It helps the auditor in obtaining, from those charged with governance, information relevant to the audit.
-It assists the auditor and those charged with governance in understanding matters related to the audit, and in developing a constructive working relationship
-It helps those charged with governance in fulfilling their responsibility to oversee
the financial reporting process, thereby reducing the risks of material misstatement of the financial statements.
-The auditor’s responsibilities with regards to providing an opinion on the financial statements and that they have carried out their work in accordance with International Standards on Auditing.
-The auditor should explain the planned approach to the audit as well as the audit timetable.
-Any key audit risks identified during the planning stage should be communicated
