What are the 3 accruals procedures?
- Obtain accruals list from client and confirm accuracy to the financial statements
- Recalculate a sample of accrued costs by reference to contracts (e.g loan interest)
- Inspect invoices received after year-end to confirm actual amount and assess whether the accrual is reasonable
What are the 5 provisions procedures?
- Obtain a breakdown of provisions and agree to financial statements
- Speak to directors to confirm present liabilities exist at year end
- Look at meeting notes to see if payments are likely to be made
- Recalculate liability and agree the calculation to supporting documentation
- Inspect after year end bank statements to identify if payments are made
What are the 8 payroll procedures?
- Agree wages and salaries expense per account to the financial statements
- Cast monthly payroll listings to verify accuracy of the payroll expense
- Recalculate gross and net pay for a sample of employees and agree to records
- Select sample of joiners/leavers and calculate their first/last pay
- For salaries, agree total payroll pay to bank payments
- For cash salaries, agree cash withdrawn to wages paid
- Agree year end tax liability to payroll records
- Compare payroll figure for this year to last year
What is Going Concern?
That the company will stay in business in the foreseeable future
Who should correct misstatements?
Management
If misstatements are not corrected, the auditor should:
Revisit their assessment of materiality
Determine whether they are material to financial statements
Report to those charged with governance
Request a written from governance
What is a written representation letter?
Statement written by management given to auditor to confirm matters or to support audit evidence
What is an audit report?
To form an opinion on financial statements based on conclusions drawn from evidence
What are the 6 substantive procedures for Work in Progress?
- Obtain a schedule of contracts in the year-end and agree the total to the financial statements
- Agree a sample of items from the schedule to the inventory count records to confirm existence
- Agree costs to documentations such as supplier’s invoice for accuracy
- Enquire contract manager how they determine the completion of the job at the year-end and agree to what was counted at the inventory check
- Confirm that net value is greater than the costs by agreeing the contract price minus the costs needed to be paid and cash received post year end
- To assess the completeness of work in progress, select a sample of orders and trace through to the list of jobs included in work in progress
