Lecture 10

Question 1

Audit budget (3)

Answer 1

• Cost of audit: staff costs/ expenses/ KGS
• Compare to audit/ interoffice fee
• Done twice a year

Question 2

WIP

Answer 2

Driven by timesheets

Question 3

Gross WIP =

Answer 3

Staff costs + Expenses + 2.5% staff costs

Question 4

Valuated hours =

Answer 4

2.5% staff costs

Question 5

Net WIP =

Answer 5

WIP after provision

Question 6

Net net WIP =

Answer 6

WIP after provision and billing to date (true exposure)

Question 7

Provisioning =

Answer 7

Bad debt provision against WIP when debtor not going to be fully recovered. Highlights WIP balances still to be billed

Question 8

POA/ FOA

Answer 8

Payment/ fees on account.

Invoices raised during audit before all work completed.

Question 9

At end of audit…

Answer 9

Final fee raised and all POA on balance sheet taken to income

Question 10

Final fees

Answer 10

Remaining to bill at end of audit

Question 11

WIP =

POAs =

Answer 11

Asset

Liability

Question 12

Conversion

Answer 12

Can choose to take WIP/POAs to P&L before end of audit. Usually only on larger clients.

Question 13

Write off =

Answer 13

Clearing down code, bad debt

Question 14

KPI - Recovery % - Profitability

Answer 14

EP = Engagement profitability

(Total fees/ total costs) x 100

Question 15

KPMG EP =

Answer 15

60%

Question 16

KPI - Net sales per hour

Answer 16

Fee earned for every hour worked

= Sales / hours charged

Question 17

KPI - Lock up

Answer 17

What’s sitting in balance sheet

= WIP lock up + debtors lock up

Question 18

KPI - Utilisation

Answer 18

Chargeable vs available time