Detailed procedures

NOVEMBER 2022
Individual areas
Individual areas
• Each individual area works in a similar way so it isn’t necessary to go
through each section in detail

• This workshop is designed to introduce you to the audit system, not

to teach how to audit a section
Individual areas
• Most sections have a standard format:
• The first working paper (for example F1) is the lead schedule
• The second schedule (for example F2) is the audit program
• Other schedules should then be filed as set out in the file dividers
Working papers
• The auditor shall design and perform audit procedures that are appropriate
in the circumstances for the purpose of obtaining sufficient appropriate
audit evidence (PSA 500)
• The auditor shall prepare audit documentation that is sufficient to enable an
experienced auditor, having no previous connection with the audit, to
understand:
• The nature, timing and extent of the audit procedures performed to comply with the
PSAs and applicable legal and regulatory requirements;
• The results of the audit procedures performed, and the audit evidence obtained; and
• Significant matters arising during the audit, the conclusions reached thereon, and
significant professional judgments made in reaching those conclusions. (PSA 230)
Substantive audit work
• Audit Files often lack
- Evidence that audit work was done
- Sufficient documentation of the work done
• Solution?
- Ensure audit evidence is sufficient - cover relevant assertions... and
- Properly document audit work and reference it to the audit programmes

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What is not included?
• Audit memos and documentation of specific
audit procedures
• Processing Client Schedules
• Monitoring Sheets
• Other Documentation

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Specific audit areas
Property, plant and equipment (fixed assets)
Inventories (stock)
Accounts receivable (debtors)
Bank and Cash
Liabilities
Accounts payable (creditors)
Income and expenditure

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Property, plant and equipment (Fixed assets) –
section C
• Existence
- Physical inspection (sample includes current
year and brought forward)
• Ownership
- Inspect property leases/register of deeds
• Valuation and disclosure
- Check additions to purchase invoices
- Impairment indicators
• Depreciation
- Rates - compare to accounting policies
• Presentation and disclosure
- Evidence to support valuations

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Inventories (Stock/Work in progress) –
section E (1 of 2)
• Ownership
- third party confirmation/consignment stock
• Existence
- stocktake attendance

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Inventories (Stock/Work in progress) –
section E (2 of 2)
• Valuation
- Valued in accordance with accounting policy?
- Cost v Net Realisable Value testing - after date review of sales invoices
- Long term Work in progress - contracts/provisions review/accounting policy
• Provisions
- Obsolete/slow moving stock
• Cut-off
- Tie in work on debtors/creditors cut-off

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Accounts receivable (debtors and
prepayments) – section F
• Cost/existence
- Circularisation/after date cash review
• Valuation
- Bad debt review
• Cut-off
- Dispatch records/credit notes
• Presentation and disclosure
- Related party transactions/Loans to directors

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Bank balances and cash – section H
• Valuation and existence
- Bank confirmations
- Reconciliations
• Presentation and disclosure
- Set off
- Overdraft disclosure
- Director guarantees – Related party disclosure

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Accounts payable (Creditors and accruals) –
section I (1 of 2)
• Completeness
- Circularisation
- Major suppliers
- Supplier statements review
- After year-end date payments/purchase invoices
Accounts payable (Creditors and accruals) –
section I (2 of 2)
• Cut-off
- Goods dispatch notes
- Purchase invoices around year end
• Presentation & disclosure
- < and > 1 year disclosures
Income and expenditure –
section O
• Income
- Accuracy
- Completeness
• Expenditure
- Accuracy
- Classification
• Wages and salaries
- Accuracy
- Completeness
Other useful documentation
• The Audit Manual has a number of other useful documents such as:
• Bank letters
• Legal advisers letters
• Valuer letters
• Debtors’ circularization letters (and reply summary)
• Specific inventory count attendance audit programs

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Questions