AUE3702 _SUBSTANTIVE PROCEDURES AND FINALYSING AN AUDIT

SUBSTANTIVE PROCEDURES AND FINALYSING AN AUDIT AUE3702 Activity 3.1.1 Assertions for sales transactons Occurrence: the sales recorded occurred and relates to the entity Accuracy: the sale is recorded at the correct amount Cut-of: the sales are accounted for in the correct accounting period or financial year Completeness: all the sales that should have been recorded have been recorded Classification: the sales have been recorded or posted in the correct account [Type here] Disclosure: all disclosures have been completely accounted for in terms of the financial reporting framework, classified in the correct account and disclosed in an understandable manner. Assertions relating to receipt transactions Occurrence: recorded receipts were actually received for amounts owed to the entity Accuracy: the receipts are recorded at the correct amount Cut-of: the receipts are allocated to the correct accounting period Completeness: all receipts have been recorded Classification: receipts are recorded in the correct account Disclosure: all disclosures are complete in terms of the international financial reporting framework, the disclosures have been correctly classified and in an understandable manner. Assertions relating to trade and receivables Existence: the trade and receivables actually existed at year end Rights: the company has a right to the amounts owed by the debtor Completeness: all trade and receivables are included at year end Accuracy, valuation and allocation: the balances of debtors are stated at correct amount and any valuation and allocation adjustments have been appropriately recorded Classification: debtors are recorded in the correct account Disclosures: all related disclosures have been completely recorded and appropriately measured and described, the disclosures are relevant and understandable in terms of the requirements of international financial reporting standards. [Type here] Activity 3.1.2 Formulating substantive procedures for revenue (sales) transactons for the year under audit Occurrence Trace a sample of recorded sales transactions from the sales journal and general ledger and; Inspect the customer order for the invoice to confirm that the sales were received from an approved customer Compare the picking slip signed by the picker and the delivery note signed by the delivery clerk and the customer with the invoice to see if the sales recorded match with the above documents Inspect the price list to confirm if the goods invoiced to the customer were of a type sold by the company. Accuracy Select a random sample of invoices and for each invoice; Confirm the mathematical accuracy of the invoice by calculating all extensions, casts, discounts and VAT calculations Confirm that prices and discounts charged and granted are the same as those on the official price lists Match the invoice to the despatch note to confirm that the quantity and description of goods are the same Cut-off select a sample of the despatch notes prior to the year end and inspect the sales journal to confirm that the corresponding sales was raised prior to year end select a sample of invoices entered in the sales journal for the month after year end and trace them to the supporting delivery notes, inspect the dates on the invoice, sales journal and delivery noted to confirm that the goods were not actually delivered prior to year end Classification [Type here] Compare sales ratios to prior periods for example sales commission to sales, cash sales to credit sales Analyse recorded sales by characteristics such as by product and customer by comparison to prior periods Compare sales to prior periods Compare budgeted sales to sales for the period Analyse gross profit fluctuations for the period Disclosures Inspect the financial statements to confrm that disclosures relating to sales are complete, classification of revenue is correct and amounts included are accurate and the accounting policies are clearly expressed and understandable. Activity 3.1.1 Formulating substantive procedures to audit trade receivables at year end Existence Extract a sample of debtors at year end from the debtors list and identify payments received afer year end from the selected debtors from the cash receipts journal and then trace these payments to the debtor’s remittance advice to identify which invoices payments is in respect of These invoices and matched delivery notes are then inspected to confrm that they are dated prior to the year end and they were included at year end in the sales journal and debtor’s ledger Obtain independent confirmation from the debtors, with the consent of management to verify if the debtors are really those of the entity Rights [Type here] Inspect prior year working papers, minutes of director’s meetings, loan agreements, bank confirmations, and by inquiry of management, determine if the receivables in the general journal have been ceded or factored or encumbered in any way Inspect ISO and correspond to the delivery note to that authorisation of credit sales was given to a customer Accuracy, valuation and allocation Review the debtors control account in the general ledger to identify unusual entries and follow up Match the total debtors on the list of individual debtors to the debtors control account in the general ledger to verify if the amounts included are the same If reconciling items are identified, casts, test the reconciling logic and follow up reconciling items to ensure that the amounts are accurately stated The debtor’s list and debtor’s control accounts should be cast to ensure that amounts are accurately calculated Review the debtors list for credit balances and these should be followed up and reversed if necessary Reference should be made to the results of any debtors circularisation and subsequent follow up for evidence of debtor valuation problems, for example, a debtor claiming that he has been charged twice Inquiry should be made of the method and procedures adopted by management to estimate the allowance for bad debt The authorisation procedure to approve credit should be established and evaluated An assessment of whether the basis of calculating the allowance for bad debt is reasonable and consistent with the prior year, should be made Completeness select a sample of despatch notes prior to year-end and inspect the sales journal to confrm that the corresponding sales was raised prior to year end [Type here] Disclosure Inspect the financial statements and consider whether Disclosures are complete in terms of international financial reporting framework Any encumbrances on debtors have been disclosed Disclosures are consistent with evidence gathered on the audit The wordings of the disclosures are clear and understandable Any classifcation of information disclosed is clear and understandable Amounts, facts and details are accurate and agree with the evidence gathered.