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AS > Susbtantive Procedures: Key Financial Statement Figures > Flashcards

Susbtantive Procedures: Key Financial Statement Figures Flashcards

1
Q

Existence of non-current assets: Audit procedures

A

Physical verification of assets selected from the non-current asset register

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2
Q

Rights and obligations in relation to non-current assets: Audit procedures

A

Inspection

E.g.
Title deeds for property
Vehicle registration documents
Share certificates
Purchase invoices

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3
Q

Completeness of non-current assets audit procedures

A

Trace sample seen in use to non-current asset register

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4
Q

Valuation of non-current assets audit procedures: cost

A

Inspect purchase invoices

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5
Q

Valuation of non-current assets audit procedures: revaluations

A

Inspect surveyor’s report

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6
Q

Valuation of non-current assets audit procedures: self-constructed assets

A

Agree labour costs to payroll records
Agree subcontractor costs to invoices
Consider reasonableness of assumptions underlying overhead calculations
Reperform calculations

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7
Q

Valuation of non-current assets audit procedures: depreciation

A

Consider appropriateness of depreciation policy
By investigating significant profits or loss on disposal

Recalculate depreciation charge

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8
Q

Some types of business where inventory will be key audit area

A

Retail

Manufacture

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9
Q

Some reasons for significance of inventory

A
  1. Can be highly material
  2. Valuation is subjective
  3. Affects neither SPL and SFP
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10
Q

Is attendance at inventory count required by ISA501?

A

Yes

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11
Q

What inventory count provides assurance over

A
  1. Quantity (test counts to check)
  2. Valuation (identifying damage, old, dusty)
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12
Q

Before the inventory count…

A
  1. Review locations and count instructions
  2. Consider whether expert help is required
  3. Review systems of control and internal auditor arrangements
  4. Arrange to verify any inventory help at 3P premises
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13
Q

During the inventory count…

A
  1. Observe counts for compliance with instructions
  2. Check cut-off arrangements
  3. Identify procedures for keeping 3P inventory separate client’s inventory
  4. Perform 2 way test counts
  5. Identify slow-moving it old inventory that may require impairment
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14
Q

After the inventory count…

A

Follow up the sample selected for test counting to check the correct quantity has been included in the final inventory listing

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15
Q

Inventory existence audit procedures

A
  1. Take sample already counted from count sheets
  2. Agree to number of items in warehouse
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16
Q

Rights and obligations in inventory audit procedures

A

Confirm inventory held by 3P from 3P
(On behalf or on premises)

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17
Q

Completeness

A

Take sample of items in the warehouse
Count them
Agree to count sheets

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18
Q

Valuation of inventory audit procedures

A
  1. Evidence over cost
  2. Evidence over net realisable value
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19
Q

Evidence over cost

A

Agree costs to purchase invoice

20
Q

Evidence over cost: Inventory manufactured by company

A
  1. Agree materials cost to invoice
  2. Agree labour costs to payroll
  3. Evaluate the reasonableness of assumptions underlying overhead calculations
    Reperform calculations
21
Q

Evidence over net realisable value of inventory sold by time of audit

A

Inspect post year-end sales invoices for evidence of actual selling prices

22
Q

Evidence over net realisable value of inventory not sold by time of audit

A

Inspect order books/price lists

23
Q

Evidence over net realisable value of inventory at inventory count

A

Looks for old it damaged items
Which may indicate obsolescence

24
Q

Evidence over net realisable value of inventory

A

Review shed inventory listing
To identify old or slow-moving items
Discuss need for impairment

25
Q

Audit of receivables main focuses

A
  1. Whether customer agrees with recorded balance
  2. Whether debt likely to be paid
26
Q

Receivables existence + rights and obligations audit procedures

A

Obtain direct confirmation of receivables balances from customers

27
Q

Valuation of receivables audit procedures

A

Select sample of receivables from receivables ledger
Inspect post year end bank statements to identify cash received from customers

Discuss allowance for doubtful debts with management
Evaluate reasonableness of their assumptions and reperform calculations

28
Q

IAS (UK) 505 external (e.g. customer) confirmations process

A
  1. Auditor prepares confirmation requests
  2. Client sends requests to customers
  3. Customers send replies direct to auditor
29
Q

Types of customer confirmation

A
  1. Positive
  2. Negative
30
Q

Positive customer confirmation

A

Confirm agreement

31
Q

Negative customer confirmation

A

Only send disagreement

32
Q

Valuation of bank audit procedures

A

Agree reconciling items to post year-end bank statements to confirm they are reasonable

33
Q

Rights and obligations testing of bank audit procedures

A

Confirm bank balances directly with bank

34
Q

Existence in bank statements audit procedures: Material cash balances held at client

A

Count it

35
Q

Existence in bank statements audit procedures: bank balances

A

Confirm directly with bank

36
Q

1 Difference between bank confirmations v customer confirmations

A

Client signs request prepared by auditor before sending to bank

37
Q

Other things an auditor may confirm with bank as well as balances

A
  1. Loans and overdraft facilities and terms
  2. Contingent liabilities
    E.g. guarantees given
  3. Securities belonging to the client that are held in safe custody by the bank
38
Q

Key payables audit risk

A

Understatement
I.e. completeness

39
Q

Completeness of payables audit procedures

A
  1. Obtain a sample of supplier statement reconciliations
    Test the reconciling items
  2. Inspect post year-end bank statements
    Identify payments to suppliers
    Trace to GRNs
    Check included in payables balance (if related to pre year end receipts)
40
Q

What do long term liabilities include?

A

Debentures
Loan stock
Other loans repayable more than one year after the year end

41
Q

If it important that financial statements disclose the correct split between current- and long-term liabilities?

A

Yes

42
Q

Long term liabilities: Key audit concepts to test

A
  1. Completeness
  2. Presentation and disclosure
  3. Accuracy and cut-off
43
Q

Completeness of long-term liabilities audit procedures

A

Obtain direct confirmation from lenders if balances, accrued interest and any security held against the loan

Inspect board minutes for evidence of any new loans

Confirm repayments are in affordable with loan agreements

44
Q

Presentation and disclosure or long term liabilities audit procedures

A

Recalculate split of loan between current and long-term

Inspect the financial statements disclosure note for adequacy

45
Q

Accuracy and cut off of long-term liabilities audit procedures

A

Verify interest charged for period
Verify adequacy of accrued interest

46
Q

P&L items key assertion

A

Completeness

47
Q

Testing P&L often requires:

A
  1. Tests of control
  2. Analytical procedures
    E.g. comparison of figured to prior year and budget
    Review on a month by month or branch by branch basis
    Using relationship between SPL items and balances (e.g. revenue and receivables, purchases and payables)
    Proof in total for items such as payroll, depreciation, interest expense
  3. Some tests of detail

AS (15 decks)

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