SP on opening balance existence

Question 1

easy mark ISA 510

Answer 1

In terms of ISA 510, with respect to opening balances, sufficient appropriate
audit evidence needs to be obtained about whether the opening balances
contain material misstatements and whether accounting policies have been
consistently applied.

Question 2

brought forward correctly

Answer 2

Compare the opening balances disclosed in the comparative financial statements
and reviewers report to the opening balances in the general ledger accounts of
asset accounts to confirm that the balances have been brought forward correctly

these procedures were in terms of JANUARY itc paper

Read the reviewer’s report and determine if there are any modifications in
the report that would materially effect these balances

Question 3

Analytical procedures

Answer 3

liquidity and solvency ratios are compared to 2022
balances and ratios to assess the reasonability of the opening balances.

Question 4

Its existence we worried so
main procedure is physically

Answer 4

Physically inspect the assets as at 30 September 2023, or shortly after year end
and
reconstruct the balance as at the beginning of the year by inspecting supporting
documentation for assets disposed of or acquired in FY2023

Question 5

With physical assets

Answer 5

nspect insurance contracts as at 1 October 2022 to identify the machinery and
equipment insured at this date. (External confirmation with the insurer.)

Question 6

Obtain the working papers from the independent reviewers regarding the
attendance of the stock count and assess whether any reliance can be placed on
the stocktake work performed by the independent reviewers (Almost like management expert) to obtain sufficient
audit evidence regarding the existence of stock by –

Answer 6

Inspecting CV/certificates of independent reviewer to determine whether they
are competent

Inspect the independent reviewer’s membership to a recognised professional
body

Enquire from the independent reviewer and management regarding any
matters that could affect the independent reviewer’s independence

Obtain evidence regarding the independent reviewer’s experience by
enquiring from the independent reviewer about other clients and other review
engagements previously performed

inspecting the working papers to determine whether the stock count was
properly organised

inspecting whether sample counts were selected from both the stock records
and the stock room to test existence and completeness; and
- verifying that sufficient coverage of all the stock items were obtained

Inspect the inventory count working papers to determine whether each item
included as part of the count was counted twice, by different counters.

Inspect the inventory count working papers to determine whether any count
discrepancies were recounted, and theoretical inventory adjusted where
applicable

Question 7

roll-back procedures

Answer 7

by verifying the sales and purchases of parts in
October 2022 and compare it to the theoretical stock balances at the beginning
of the financial year – compare the roll-back balances to the opening balances of
inventory

Question 8

substantive analytical procedures

Answer 8

comparing the sales of parts during
October 2022 with the opening inventory balances plus purchases – if there are
unexplained variances with the closing stock balances, investigate the reasons
for any differences

Question 9

difficult to determine the existence and value of inventory

Answer 9

1 October
2022 since the stock count was not attended by staff members of CAI, which
already signals that a qualified / disclaimer of audit opinion would need to be
provided in this regard

Question 10

Debtors’ balances at 1 October 2022

Details + precision

Answer 10

would need to be verified by means of a
debtors circulation (3rd party confirmation) that needs to be sent out directly to
customers to verify the amount.
This should be done using a positive debtors circularisation.
Obtain permission from management to perform 3rd party confirmation

Question 11

signed contracts

Answer 11

Inspect the signed contracts and confirm that debtors’ balances are made up of
30% of the invoiced amount as per the payment terms and conditions –
investigate any amounts in excess of 30%.

Question 12

not respond

Answer 12

. If the debtors do not respond to the aforementioned circulation, the audit team
would need to determine if the debtors paid their outstanding balances in FY2023
through verification in the bank statements / cash receipts register (or journal) by
performing subsequent receipts testing

Question 13

subsequent receipt testing

Answer 13

If the debtors did not respond to the above confirmation and no payments
were received after year-end, test the detail of the transactions making up
the balance of the debtor in question by selecting the invoices making up
the balance(s) at 1 October 2022 in the debtors’ accounts in the debtors
ledger and inspecting the corresponding delivery notes for the debtors’
signatures

Question 14

Inspect the bank statement to confirm if the physical cash on hand was banked
on 1 October 2022 or soon thereafter and perform roll-back procedures to verify
its existence.

Answer 14

The bank account balance as at 1 October 2022 could be verified by way of
executing a bank confirmation (3rd party confirmation) and requesting the bank
balance directly from the bank

Question 15

Obtain a management representation letter specifically addressing the existence
of assets at the beginning of the year

Answer 15

Obtain a confirmation from the independent reviewer that approval for access to
working papers and other information regarding opening balances was given

Question 16

Answer 16