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- This topic has 9 replies, 2 voices, and was last updated 6 years ago by MikeLittle.
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- March 17, 2018 at 9:19 am #442844
Im very much sure craming the procedures is useless. However regarding procedures of lets say work in progress, std cost in ias 2, and some other not so simple units ,is very difficult for me as a person never involved in audit. Thus can u give me any tips on remembering and generating valid points on procedures
March 17, 2018 at 3:39 pm #442870Very 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?
March 17, 2018 at 4:08 pm #442874Okay
For Work in progress
-Count the actual WIP and compare with the figure in balance sheet
-analytical procedures comparing last yr to this yr WIP
-Check the figure to be in balance sheet under current assetHowever sir when i open the textbook its really annoying to see such complex procedures its out of my scope!
March 17, 2018 at 5:15 pm #442875What 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?
March 17, 2018 at 6:11 pm #442881-Inspect condition of the inventory and consider the need of any obsolete to be expensed if nrv is lower
-Observe the process of manufacture and decide whether the product(WIP) is actually in progress or needs to be a complete product(closing)
-Enquire of management the calculation used to value its NRVThanks for following up rapidly!
One more qn for you
The way u said think abt existence valuation etc etc do i have to think all this to generate procedures?March 17, 2018 at 9:12 pm #442892Of 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!
March 18, 2018 at 7:22 am #442910Thanks for such motivational exercise
For the car
-Enquire management on the model used
-Recalculate the NBV and Depreciation
-Inspect the asset register to see completeness
-physically verify the car in the Company
-If any accounting policy changes have occurred,check for management bias
-if fair value has been used make sure IFRS 13 is complied to value it through active marketsMarch 18, 2018 at 8:13 am #442914“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 committeeNot 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 statementsUse DISCOVER to stimulate the thought processes – it could help
OK?
March 18, 2018 at 8:16 am #442915Thank you sir! It was helpful
March 18, 2018 at 8:19 am #442916You’re welcome
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