Audit Procedures

Topics: Normal distribution, Auditor's report, Audit Pages: 3 (960 words) Published: March 12, 2011

Analytical Procedures – ISA 520 states that analytical procedures must be used at the planning stage to identify risks and at the completion stage of the audit as a final review. They are not just the comparison of one year with another AP’s can be used in ratio, trend analysis and proof in total. In order to use analytical procedures the following processed should be followed, create your own expectation of what you think the figure should be, compare with the actual and investigate differences. Comparisons will be used by the auditor between the current and previous year, between actual and budget figures and with similar companies.

RECEIVEABLES: People that owe us money, prepayments people that owe us services. Key Questions: are they going to pay, did we make the payment, is it in the correct period, is the calculation correct? Procedures: circularisation letters, ask them, see if they have paid since the year ended, verify payments, review invoices and cut off times. Other Evidence: Obtain list of individual balances from the ledger and check the cast and agree the total to the receivables figure, obtain a list of credit balances and obtain explanations, agree brought forward figure to last years. INVENTORIES: Raw Materials, finished goods and work in progress. Key Questions: are the qualities correct and is the valuation correct? Usually subject to a degree of estimation and is always complex. It is valued at the lower of cost and NBV. Principles: The inventory is a one off it is a single opportunity to establish what is and what is not in the inventory. It must be tested for both existence and completeness. The auditor needs to be well organised and ensure sufficient evidence is gathered as inventory counts can be rather complex. It is the client’s responsibility to establish the correct value of the inventory. The auditor’s job is to form an opinion as to whether that value is materially correct or...
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