Audit procedures

Very simply … use your common sense!

How would you go about confirming the quantities, condition, valuation, existence, ownership and presentation of inventory

Well? How would you do it?

Answer me with some common sense answers and then I’ll see if I can add anything

OK?

What on Earth do you mean “Count the work in progress and compare with the figure in the balance sheet”?!!!

Ok, say there are 15 items in progress. Now, where in the statement of financial position (NOT the balance sheet) will you find this figure of 15?

What do you mean “Check the figure to be in balance sheet under current asset”!!!

Check the figure to what? And why? And how?

“Analytical procedures” sounds to be a plural – you’ve mentioned just one

How about confirming existence?

And condition?

And ownership?

And valuations?

Go back to basics – the assertions – and then take each one and try to apply common sense as to how you could confirm each of those assertions

P7 Auditing is NOT a paper to start memorising lists of procedures. It’s a fine example of the application of common sense. As a non-auditor you are, in fact, probably in a better position than all those Big 4 audit personnel!

Why? Because they tend not to write down matters that are glaringly obvious whereas you, with no audit experience, will write down anything and everything that may be even remotely relevant

And the beauty is … it’s all common sense

Now, have another go at the problem that I’ve set for you and see if you can’t get some sensible points down … and then I’ll see if I can add anything

OK?

Of course you do! How else are you going to start ascertaining the reliability of management’s figure for inventory?

Your post above is better than the previous effort … but you’re still missing LOADS!

Apply common sense!

Change the subject – I have a car. It’s on my statement of financial position at a value of $18,000

Audit that asset!

“Standard” matters that you could include when answering a “procedures” question:

Board minutes
Talk to management
Last year’s file
Cash entries
Third party certificates
Adds and calcs
Internal controls
Internal auditors
Audit committee

Not all of these will necessarily be relevant to any individual procedures question, but many of them could be

Have you tried, when considering audit procedures to audit assets and liabilities, to use the mnemonic DISCOVER?

Documents of title (ownership documents)
Internal controls
Standards and statute
Certificates from third parties
Observation
Valuation
Events, trends and ratios (subsequent events and analytical review)
Recording within the accounting records and the annual financial statements

Use DISCOVER to stimulate the thought processes – it could help

OK?

You’re welcome