Substantive procedures

Question 1

Bank Cash balance

Answer 1

• obtain bank account reconciliation and check the additions to confirm arithmetical accuracy.
• obtain bank confirmation letter from bankers for all of its accounts
• agree the reconciliation balance per the cashbook to the year-end cashbook
• agree all balances listed on the bank confirmation letter to bank reconciliation or trial balance to ensure completeness of bank balance.

Question 2

Trade payables

Answer 2

• compare to prior years and investigate significant differences
• obtain supplier statements and reconcile these to payable ledger balance and investigate any reconciling items
• select a sample of purchase invoices ascertain through reviewing GRN if goods were received pre or post Y/E confirm they have been excluded from ledger.
• select a sample of payable balances and perform a trade payable circularisation, follow up any none replies and reconciling items between the balance confirmed and trade payables balance.

Question 3

Noncurrent liabilities

Answer 3

• obtain breakdown of all outstanding loan @ Y/E and cast to verify arithmetical accuracy agree to financial statement for completeness.
• agree the balance outstanding to bank confirmation letter accuracy, valuation, rights obligaiton
• recalculate split between CL and NCL inspect financial statement for disclosure of interest rates / Split of loan
• inspect confirmation letter for details of any security over assets and agree the disclosure to FS

Question 4

research and development

Answer 4

• agree the closing balances to GL trial balance and draft FS
• Recalculate the amortisation charge for a sample of intangible assets which have commenced production and confirm in line with policy
• discuss with finance director rationale for X years useful life consider it reasonableness
• for those expensed as research, agree cost incurred to invoices and supporting documentation to profit loss.

Question 5

Depreciation

Answer 5

• select sample of PPE and recalculate the Dep’n charge to ensure NCA register is correct and new dep’n rates have been appropriately applied
• review NCA register to assess revised rate has been applied.
• Review and recalculate P/L on disposal assets to assess reasonablness of revised DEp’n rates

Question 6

Receivables

Answer 6

• obtain the aged receivable listing and agree to balance on the receivable ledger control account + TB
• select a representative sample of trade receivables and review for any after date cash receipts ensure sample of slow-moving
• calculate the average receivable period and compare this to the prior year and investigate significant differences
• Review board minutes to identify whether there any balances which are in dispute or unlikely to be paid.
• Select a sample of GDN immediately before and after Y/E and follow to receivable ledger to ensure they are recorded in the correct period

Question 7

Restructuring provision

Answer 7

• cast the breakdown of the restructuring provision to ensure it is correctly calculated and agree the total to the TB
• obtain a breakdown of the restructuring provision and confirm that only direct expenditure relating to the restructuring is included.
• review post year end payment/invoice relating to expenditure and compare to the actual costs incurred to the amounts provided to assess whether the amount of the provision is reasonable