AUE3702 Study Guide
AUE3702 Study Guide
AUE3702 Study Guide
AUE3702
Semester 1 and 2
Department of Auditing
IMPORTANT INFORMATION
This tutorial letter contains the suggested solution and comments on
Assignment 02
BARCODE
SUGGESTED SOLUTION AND COMMENTS ON ASSIGNMENT 02/2021
QUESTION
Occurrence
1. Select a sample of transaction entries recorded in the sales journal/general
ledger and trace the transaction to (occurrence) ^ ^
1.1 a customer order from an approved customer ^
^
1.2 a picking slip (yellow copy) ^
^
1.3 a signed delivery note (blue copy) dated within the current financial year ^
^
1.4 an invoice (white copy) ^
1.5 the invoice details – goods sold by the client ^ ^
Completeness
5.1 Agree the transfer amounts from the monthly sales journals to the sales and
VAT control accounts in the general ledger ^. ^
5.2 Scrutinise the sales account for the inclusion of amounts recorded as
revenue but that do not constitute sales e.g. interest ^.
^
5.3 Inspect the sales account in the general ledger for any large or unusual
transactions and follow up with management ^.
5.4 Agree the general ledger total to that of the trial balance ^. ^
2
AUE3702/202/1/2021
5.5 Agree the total of the trial balance to the revenue disclosed on the face of the
statement of comprehensive income/annual financial statements ^. ^
^
Presentation
Available 33
Maximum 31
Communication skills: appropriate style 2
2.1 Factors to consider before relying on the work of the internal auditor MARKS
Reference: ISA 610 (revised).15 and A5-A11 and learning unit 1.4 and
12 Marks
Auditing Notes 4/46 – 4/48
1. Objectivity
1.1 The status of the internal audit function within the entity and the effect such
status has on the ability of the internal auditors to be objective^. ^
1.2 Whether the internal audit function reports to those charged with
governance or an officer with appropriate authority, and whether the internal
^
auditors have direct access to those charged with governance^.
1.3 Whether the internal auditors are free of any conflicting responsibilities ^. ^
1.4 Whether those charged with governance oversee employment decisions
related to the internal audit function^. ^
1.5 Whether there are any constraints or restrictions placed on the internal audit
function by management or those charged with governance^. ^
1.6 Whether, and to what extent, management acts on the recommendations of
the internal audit function, and how such action is evidenced^. ^
1.7 Whether the internal auditors are members of relevant professional bodies
and their membership obligates compliance to professional standards^. ^
3
2.1 Factors to consider before relying on the work of the internal auditor MARKS
Reference: ISA 610 (revised).15 and A5-A11 and learning unit 1.4 and
12 Marks
Auditing Notes 4/46 – 4/48
2. Technical competence
2.1 Whether the internal auditors have adequate technical training and
^
proficiency as internal auditors^.
2.2 Whether the internal audit function is adequately and appropriately
resourced^. ^
2.3 Whether the internal auditors have the required knowledge and skills
related to the industry specific knowledge and ability to perform work related
^
to the entity’s financial statements^.
2.4 Whether there are established policies for hiring and training internal
^
auditors^.
Available 21
Maximum 12
4
AUE3702/202/1/2021
Existence
1. Select a sample of items of property plant and equipment from the fixed ^
asset register ^.
2. Physically inspect the assets by agreeing the asset numbers/car registration ^
numbers and descriptions of the property, plant and equipment as obtained
from the fixed asset register ^.
^
3. Select a sample of items from the FAR and inspect the short-term insurance
schedule for inclusion of these items ^.
4. Select a sample of the PPE on the FAR and inspect the registration
^
documentation or licence renewal or lease agreements or invoices of
these PPE ^.
Accuracy, valuation and allocation
5. Compare the opening balances for the cost and the accumulated ^
depreciation in the general ledger and the financial statements of this year to
the closing balances of the prior year/prior year work paper ^.
5
3 Property, plant and equipment – Existence and valuation of balance MARKS
Auditing Notes 14/25-14/26 & learning unit 3.5
22 Marks
6. Reperform all casts and extensions in the fixed asset register OR ^
recalculate the FAR and compare the recalculated balances with the current
closing balances in the fixed asset register ^.
^
7. Compare the fixed asset register balance (cost and accumulated depreciation)
with the balance in the general ledger, trial balance and financial
statements ^.
8. Select a sample of property, plant and equipment from the FAR and compare ^
the item values with the property, plant and equipment listed in the insurance
policy to confirm that item values are in line with the replacement costs ^.
9. Select a sample of property, plant and equipment from the FAR and
^
physically inspect the condition of the property, plant and equipment to
assess whether there is any indication that the property, plant and equipment
might be impaired ^.
10. Reperform the depreciation calculations and compare the recalculated
^
amounts with the amounts in the fixed asset register ^.
11. Enquire from the production manager/staff, etc. regarding any item of
^
property plant and equipment that is not in good working order or that needs
to be replaced in order to determine if any assets should be impaired ^.
Existence/accuracy, valuation and allocation
12. Scrutinize the fixed asset register of PM for any unusual/abnormal entries ^
^.
13. and discuss these cases with management, for example ^: ^
14. No current year depreciation where the item value is greater than nil
^
(valuation) ^.
15. Where there is no asset but a depreciation value appears, for example for
^
assets that were disposed of in the prior year, there should not be any
depreciation (valuation) ^.
16. Where the current depreciation exceeds the accumulated depreciation ^
(valuation) ^.
17. Addition amounts capitalised that should have been expensed (e.g. repairs ^
and maintenance) (valuation) ^.
18. Duplicate asset numbers (existence) ^. ^
6
AUE3702/202/1/2021
Reference:
25 Marks
Auditing notes 12/22–12/28 & learning unit 3.3
1. Use CAATs to calculate the opening balance of this year by using the ^
applicable fields in this year’s master file and comparing this balance with the
closing balance of the prior year either by recalculating the closing balance
using the same fields in the prior year’s master fi e or with the closing balance
in the financial statements. Follow up on differences.
2. Use CAATs to compare the quantity of inventory per the final inventory
^
count sheets to the amount recorded in the inventory masterfile to confirm
that all inventory quantity adjustments processed are processed after the stock
count and follow up on any discrepancies noted ^ .
^
3. Use CAATs to recalculate the total inventory at year-end by multiplying the
inventory items by the cost( or selling price if it is lower) ^ and compare it to
the value of closing inventory in the financial statements/trial
balance/general ledger to confirm that it has been recorded at the correct ^
value ^.
4. Use CAATs to scan the inventory masterfile for ‘’error conditions’’ ^, for ^
example:
7
4. Substantive procedures to audit the value of finished goods with the
assistance of computer assisted auditing techniques (CAATs) MARKS
Reference:
25 Marks
Auditing notes 12/22–12/28 & learning unit 3.3
- Amounts in the total fields but no amount in the quantity field ^. ^
12. Use CAATs to confirm the correct exchange rate has been used (rate at date ^
of transaction) ^.
13. Use CAATs to confirm the appropriate import and customs duties and ^
Available 33
Maximum 23
Communication- appropriate style 2