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Dear sir,
Few days left to go…. and I’ve been going through Audit risks and I’m stumped when I see the questions, is there any technique I can use nailing these sort of qns?As for the above qn from Sept- dec 2017… one of the audit risks was that resources were scarce and so it wasn’t possible for the auditors to go to all 11 buildings… however in the answer…(in the audit risk column), this is written,
“It is unlikely that the auditor will be able to attend all of these inventory counts, increasing detection risk, and therefore they need to ensure that they obtain sufficient evidence over the inventory counting controls, and completeness and existence of inventory for any sites not visited”
Isn’t that supposed to be in the audit response to the risk column?
Also, in the response, it says
“For those not visited, the auditor will need to review the level of exceptions noted during the count and discuss with management any issues, which arose during the count.”What does this mean?
Thanks.
Look at every little detail supplied in the question. It is almost certainly there for a reason. You are rarely told irrelevant stuff.
So here, it is pretty clear that there will be an inventory count attendance problem. Also warranties are mentioned, so think what could go wrong. Similarly, non-recoverable debts.
With regard to your comment about the risk/response column, having to obtain evidence is not a response: knowing that you have to obtain sufficient appropriate audit evidence is your starting point for all material amounts in the FS. You have to say how you could do that in your response.
It could be, attend as many of the most material sites as you can.Review the performance of the counts there. Review the WiP records to see how the costs are accrued and if they seem accurate. If there is an internal audit department, then they could do some visits.
The response you ask about means that client staff will have attended and might note down where book values and count values are different. These would be the exceptions and we need to understand why they occurred.
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