Topic 6 - audit procedures

Question 1

What are some audit procedures?

Answer 1

inspections of intangible assets

inspection of documentation

observation

inquiry

external confirmation of a particular enquiry

recalculation

reperformance

analytical procedures

sensitivity analysis

aged analysis on assets

Question 2

verbs to start audit procedures with?

Answer 2

compare, inspect, verify, trace, inquire, recalculate, obtain, review

Question 3

reasons why you want to see the piece of evidence?

Answer 3

CRAVE for balances

completeness

rights and obligations

accuracy/ allocatioin

valuation

existence

COCOA for transactions

completenes
occurence
classification
cut off
accuracy

Question 4

two types of procedures?

Answer 4

tests of control

substantiative procedures

Question 5

Two types of substantive procedures?

Answer 5

Substantive analytical procedures - calculate an expectation for payroll by taking last years figure and adjusting for an increase in staff numbers and pay rises. compare to actual and investigate variances

tests of detail - select a sample of employees from the payroll and obtain copies of their passport an d employment contract to confirm they are genuine employees

Question 6

Good inventory procedures

Answer 6

inspect a sample of invoices and agree the cost of inventory purchased

review year end sales of inventory and identify items which have been sold at a loss

compare inventory days year on year and investigate unusual variances

review ages inventory and investigate old or slow moving items

observe inventory count and ensure that instructions are being followed and damaged items are identified

trace a sample of inventory from stock listing to the shelves in the warehouse to ensure it exists

Question 7

procedures when relying on someone else’s work?

Answer 7

STRIP

scope - inspect engagement letter/ instructions from the expert to confirm appropriate measurement bases have been used

technical competence - review the experts qualifications and training to ensure they are able to perform work

resources - inspect the report produced by the expert to ascertain if the work performed was appropriate and detailed

independence - obtain a list of shareholders to confirm expert is not a share holder

professionalism - review board minutes to identify what actions have implemented following experts suggestions