Audit
Topics: Depreciation, Auditing, Financial audit, Risk, Internal control / Pages: 6 (1374 words) / Published: Sep 11th, 2013

5.30 (Medium) Sufficient appropriate audit evidence has not been obtained to support the conclusions. | | Procedures | General point | Quality (appropriate evidence) | Quantity (sufficient) | (a) | Observation of stock take - went according to instructionsInventory test counts and cut-off prove satisfactory. | To conclude that the ACCOUNT balance is fairly stated (i.e. in $$ terms), all material assertions must be verified. | Existence assertion (an overstatement test) has been tested from the stock sheet to the floor (one direction).Test counts should also have been selected from the factory floor and checked to the client’s inventory sheets to test for the assertion of completeness (an understatement test in the other direction). Quantities must be tested BOTH ways. | No work has been carried out on the valuation and allocation assertion. Auditor cannot come to the conclusion that the Inventory is fairly stated without * an understatement test of quantities and * then work on the valuation e.g. Q x P = Value i.e. cost of products using accounting policy, and then * testing the provision for obsolescence | (b) | Tests of control (sales prices to selling price list) revealed 3 / 20 were not checked by sales clerk, despite the prices being matched without error. | The test of control is checking for existence and effectiveness of the control. | Failing to complete the ‘prices checked’ box means that there were 3 deviations out of 20 for the test of existence of the control. The fact that the prices were correct is not relevant when checking the existence of the control. | * It could be concluded that there is already enough evidence to say that the control is not working. * A lot depends on the definition of a 'deviation=error'. * If the error had to include an incorrect price a bigger sample would have be drawn before a conclusion could be reached. | (c) | Post-balance sheet sales returns of Product 75l were noted as large in number.

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