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Part Eight
Production amp Cost Audit
Structure of Seminar
bull 1 Inventory
bull 2 Payroll
1 Inventory
bull 1) Introduction to auditing inventorybull The key assertions relating to inventory arebull 1048696 Existencebull 1048696 Completenessbull 1048696 Rights and obligationsbull 1048696 Valuationbull 1048696 Cut-off
Inventory
bull 2 ) Accounting for inventorybull The valuation and disclosure rules for inventory are
laid down in IAS 2 Inventories Inventory should bebull valued at the lower of cost and net realisable valuebull Production costs (costs of conversion) includebull (a) Costs specifically attributable to units of
productionbull (b) Production overheadsbull (c) Other overheads attributable to bringing the
Inventory product or service to its present location and
condition
3) Audit procedures for inventory
Audit objectives
(1) completeness
(2) existence
(3) right and obligation
(4) valuation and allocation
(5) cut-off
(6) accuracy
(7) occurrence and right and obligation
Inventory
4) The physical inventory count
bull ISA 501 Audit evidence ndash specific considerations for selected items provides guidance to auditors on attending the physical inventory count to obtain evidence regarding the existence and condition of inventory
bull It states that where inventory is material auditors shall obtain sufficient appropriate audit evidence regarding its existence and condition by attending the physical inventory count (unless this is impracticable)
Inventory
to do the following
bull Evaluate managementrsquos instructions and procedures for recording and controlling the result of the physical inventory count
bull 1048696 Observe the performance of the count proceduresbull 1048696 Inspect the inventorybull 1048696 Perform test countsbull Factors to consider when planning attendance at the
inventory count include the following
Inventory
bull The risks of material misstatement of inventory
bull 1048696 Internal controls related to inventory
bull 1048696 Whether adequate procedures are expected to be established and proper instructions issued for counting
bull 1048696 The timing of the count
bull 1048696 Whether the entity maintains a perpetual inventory system
bull 1048696 Locations at which inventory is held (including materiality at different locations)
bull 1048696 Whether the assistance of an auditorrsquos expert is required
Inventory
bull (1) The inventory count
bull A business may count inventory by one or a combination of the following methods
bull (a) Physical inventory counts at the year-end
bull (b) Physical inventory counts before or after the year-end
bull (c) Perpetual (or continuous) inventory where management has a programme of inventory-counting throughout the year
bull If perpetual inventory counting is used auditors will verify that management
bull (a) Ensures that all inventory lines are counted at least once a year
Inventory
bull (b) Maintains adequate inventory records that are kept up-to-date
bull (c) Has satisfactory procedures for inventory counts and test-counting
bull (d) Investigates and corrects all material differencesbull (2) Planning attendance at inventory count
bull Before the physical inventory count the auditors should ensure audit coverage of the count is appropriate and that the clients count instructions have been reviewed
(3) Attendance at inventory count
Inventory
bull The auditors working papers should include
bull 1048696 Details of their observations and tests
bull 1048696 The manner in which points that are relevant and material to the inventory being counted or
bull measured have been dealt with by the client
bull 1048696 Instances where the clients procedures have not been satisfactorily carried out
bull 1048696 Items for subsequent testing such as photocopies of (or extracts from) rough inventory sheets
bull 1048696 Details of the sequence of inventory sheets
bull 1048696 The auditors conclusions
Inventory
bull (4) After the inventory countbull After the count the auditors should check that final
inventory sheets have been properly compiled from count records and that book inventory has been appropriately adjusted
bull (5)Inventory held by third partiesbull Where the entity has inventory that is held by third
parties and which is material to the financial
statements the auditor shall obtain sufficient appropriate audit evidence by performing one or both of the following
Inventory
bull Direct confirmation from the third party regarding quantities and condition (in accordance with
bull ISA 505 External confirmations)bull 1048696 Inspection or other appropriate audit procedures (if
third partyrsquos integrity and objectivity arebull doubtful for example)bull The other appropriate audit procedures referred to
above could include the followingbull 1048696 Attending or arranging for another auditor to attend
the third partyrsquos inventory count
Inventory
bull 1048696 Obtaining another auditorrsquos report on the adequacy of the third partyrsquos internal control for ensuring
bull that inventory is properly counted and adequately safeguarded
bull 1048696 Inspecting documentation in respect of third party inventory (eg warehouse receipts)
bull 1048696 Requesting confirmation from other parties when inventory has been pledged as collateral
2 Payroll
1) Tests of control
bull Test sample of time sheet clock cards for approval by responsible official
bull 1048696 Observe wages distribution to ensure right person collect right pay
bull 1048696 Test authorization of payroll amendments bull 1048696 Examine evidence of checking payroll calculation bull 1048696 Examine evidence of approval bull 1048696 Examine evidence independence checks of payroll bull 1048696 Test controls over unclaimed wages bull 1048696 Examine explanation for variance
Payroll
bull 2)Substantive tests bull Substantive tests in respect of payroll focus primarily
on whether or not expenses have been overstated as a result of
bull 1048696 Payments being made to fictitious employees
bull Genuine employees being paid for hours they have not worked
bull 1048696 Inappropriate rate
Payrollbull The main tests are as follows bull 1 analytical review bull 1048696 compare with production level sales level bull 1048696 Compare levels of payroll throughout the year on a
month-by-month basis bull 1048696 Check leavers and joiners changes in the rates of
pay bull 2 test cast and calculation bull 3 test samples of personnel records for rate of pay
authorization of changes leavers` and joiners` detail
Payroll
bull 4 Cut-off test bull 5 select sample check to time records test to
personnel records test cast and calculations with reference to tax
bull 6 test posting of payroll to general ledger account bull 7 test total cheques to net pay(PAYE)
Structure of Seminar
bull 1 Inventory
bull 2 Payroll
1 Inventory
bull 1) Introduction to auditing inventorybull The key assertions relating to inventory arebull 1048696 Existencebull 1048696 Completenessbull 1048696 Rights and obligationsbull 1048696 Valuationbull 1048696 Cut-off
Inventory
bull 2 ) Accounting for inventorybull The valuation and disclosure rules for inventory are
laid down in IAS 2 Inventories Inventory should bebull valued at the lower of cost and net realisable valuebull Production costs (costs of conversion) includebull (a) Costs specifically attributable to units of
productionbull (b) Production overheadsbull (c) Other overheads attributable to bringing the
Inventory product or service to its present location and
condition
3) Audit procedures for inventory
Audit objectives
(1) completeness
(2) existence
(3) right and obligation
(4) valuation and allocation
(5) cut-off
(6) accuracy
(7) occurrence and right and obligation
Inventory
4) The physical inventory count
bull ISA 501 Audit evidence ndash specific considerations for selected items provides guidance to auditors on attending the physical inventory count to obtain evidence regarding the existence and condition of inventory
bull It states that where inventory is material auditors shall obtain sufficient appropriate audit evidence regarding its existence and condition by attending the physical inventory count (unless this is impracticable)
Inventory
to do the following
bull Evaluate managementrsquos instructions and procedures for recording and controlling the result of the physical inventory count
bull 1048696 Observe the performance of the count proceduresbull 1048696 Inspect the inventorybull 1048696 Perform test countsbull Factors to consider when planning attendance at the
inventory count include the following
Inventory
bull The risks of material misstatement of inventory
bull 1048696 Internal controls related to inventory
bull 1048696 Whether adequate procedures are expected to be established and proper instructions issued for counting
bull 1048696 The timing of the count
bull 1048696 Whether the entity maintains a perpetual inventory system
bull 1048696 Locations at which inventory is held (including materiality at different locations)
bull 1048696 Whether the assistance of an auditorrsquos expert is required
Inventory
bull (1) The inventory count
bull A business may count inventory by one or a combination of the following methods
bull (a) Physical inventory counts at the year-end
bull (b) Physical inventory counts before or after the year-end
bull (c) Perpetual (or continuous) inventory where management has a programme of inventory-counting throughout the year
bull If perpetual inventory counting is used auditors will verify that management
bull (a) Ensures that all inventory lines are counted at least once a year
Inventory
bull (b) Maintains adequate inventory records that are kept up-to-date
bull (c) Has satisfactory procedures for inventory counts and test-counting
bull (d) Investigates and corrects all material differencesbull (2) Planning attendance at inventory count
bull Before the physical inventory count the auditors should ensure audit coverage of the count is appropriate and that the clients count instructions have been reviewed
(3) Attendance at inventory count
Inventory
bull The auditors working papers should include
bull 1048696 Details of their observations and tests
bull 1048696 The manner in which points that are relevant and material to the inventory being counted or
bull measured have been dealt with by the client
bull 1048696 Instances where the clients procedures have not been satisfactorily carried out
bull 1048696 Items for subsequent testing such as photocopies of (or extracts from) rough inventory sheets
bull 1048696 Details of the sequence of inventory sheets
bull 1048696 The auditors conclusions
Inventory
bull (4) After the inventory countbull After the count the auditors should check that final
inventory sheets have been properly compiled from count records and that book inventory has been appropriately adjusted
bull (5)Inventory held by third partiesbull Where the entity has inventory that is held by third
parties and which is material to the financial
statements the auditor shall obtain sufficient appropriate audit evidence by performing one or both of the following
Inventory
bull Direct confirmation from the third party regarding quantities and condition (in accordance with
bull ISA 505 External confirmations)bull 1048696 Inspection or other appropriate audit procedures (if
third partyrsquos integrity and objectivity arebull doubtful for example)bull The other appropriate audit procedures referred to
above could include the followingbull 1048696 Attending or arranging for another auditor to attend
the third partyrsquos inventory count
Inventory
bull 1048696 Obtaining another auditorrsquos report on the adequacy of the third partyrsquos internal control for ensuring
bull that inventory is properly counted and adequately safeguarded
bull 1048696 Inspecting documentation in respect of third party inventory (eg warehouse receipts)
bull 1048696 Requesting confirmation from other parties when inventory has been pledged as collateral
2 Payroll
1) Tests of control
bull Test sample of time sheet clock cards for approval by responsible official
bull 1048696 Observe wages distribution to ensure right person collect right pay
bull 1048696 Test authorization of payroll amendments bull 1048696 Examine evidence of checking payroll calculation bull 1048696 Examine evidence of approval bull 1048696 Examine evidence independence checks of payroll bull 1048696 Test controls over unclaimed wages bull 1048696 Examine explanation for variance
Payroll
bull 2)Substantive tests bull Substantive tests in respect of payroll focus primarily
on whether or not expenses have been overstated as a result of
bull 1048696 Payments being made to fictitious employees
bull Genuine employees being paid for hours they have not worked
bull 1048696 Inappropriate rate
Payrollbull The main tests are as follows bull 1 analytical review bull 1048696 compare with production level sales level bull 1048696 Compare levels of payroll throughout the year on a
month-by-month basis bull 1048696 Check leavers and joiners changes in the rates of
pay bull 2 test cast and calculation bull 3 test samples of personnel records for rate of pay
authorization of changes leavers` and joiners` detail
Payroll
bull 4 Cut-off test bull 5 select sample check to time records test to
personnel records test cast and calculations with reference to tax
bull 6 test posting of payroll to general ledger account bull 7 test total cheques to net pay(PAYE)
1 Inventory
bull 1) Introduction to auditing inventorybull The key assertions relating to inventory arebull 1048696 Existencebull 1048696 Completenessbull 1048696 Rights and obligationsbull 1048696 Valuationbull 1048696 Cut-off
Inventory
bull 2 ) Accounting for inventorybull The valuation and disclosure rules for inventory are
laid down in IAS 2 Inventories Inventory should bebull valued at the lower of cost and net realisable valuebull Production costs (costs of conversion) includebull (a) Costs specifically attributable to units of
productionbull (b) Production overheadsbull (c) Other overheads attributable to bringing the
Inventory product or service to its present location and
condition
3) Audit procedures for inventory
Audit objectives
(1) completeness
(2) existence
(3) right and obligation
(4) valuation and allocation
(5) cut-off
(6) accuracy
(7) occurrence and right and obligation
Inventory
4) The physical inventory count
bull ISA 501 Audit evidence ndash specific considerations for selected items provides guidance to auditors on attending the physical inventory count to obtain evidence regarding the existence and condition of inventory
bull It states that where inventory is material auditors shall obtain sufficient appropriate audit evidence regarding its existence and condition by attending the physical inventory count (unless this is impracticable)
Inventory
to do the following
bull Evaluate managementrsquos instructions and procedures for recording and controlling the result of the physical inventory count
bull 1048696 Observe the performance of the count proceduresbull 1048696 Inspect the inventorybull 1048696 Perform test countsbull Factors to consider when planning attendance at the
inventory count include the following
Inventory
bull The risks of material misstatement of inventory
bull 1048696 Internal controls related to inventory
bull 1048696 Whether adequate procedures are expected to be established and proper instructions issued for counting
bull 1048696 The timing of the count
bull 1048696 Whether the entity maintains a perpetual inventory system
bull 1048696 Locations at which inventory is held (including materiality at different locations)
bull 1048696 Whether the assistance of an auditorrsquos expert is required
Inventory
bull (1) The inventory count
bull A business may count inventory by one or a combination of the following methods
bull (a) Physical inventory counts at the year-end
bull (b) Physical inventory counts before or after the year-end
bull (c) Perpetual (or continuous) inventory where management has a programme of inventory-counting throughout the year
bull If perpetual inventory counting is used auditors will verify that management
bull (a) Ensures that all inventory lines are counted at least once a year
Inventory
bull (b) Maintains adequate inventory records that are kept up-to-date
bull (c) Has satisfactory procedures for inventory counts and test-counting
bull (d) Investigates and corrects all material differencesbull (2) Planning attendance at inventory count
bull Before the physical inventory count the auditors should ensure audit coverage of the count is appropriate and that the clients count instructions have been reviewed
(3) Attendance at inventory count
Inventory
bull The auditors working papers should include
bull 1048696 Details of their observations and tests
bull 1048696 The manner in which points that are relevant and material to the inventory being counted or
bull measured have been dealt with by the client
bull 1048696 Instances where the clients procedures have not been satisfactorily carried out
bull 1048696 Items for subsequent testing such as photocopies of (or extracts from) rough inventory sheets
bull 1048696 Details of the sequence of inventory sheets
bull 1048696 The auditors conclusions
Inventory
bull (4) After the inventory countbull After the count the auditors should check that final
inventory sheets have been properly compiled from count records and that book inventory has been appropriately adjusted
bull (5)Inventory held by third partiesbull Where the entity has inventory that is held by third
parties and which is material to the financial
statements the auditor shall obtain sufficient appropriate audit evidence by performing one or both of the following
Inventory
bull Direct confirmation from the third party regarding quantities and condition (in accordance with
bull ISA 505 External confirmations)bull 1048696 Inspection or other appropriate audit procedures (if
third partyrsquos integrity and objectivity arebull doubtful for example)bull The other appropriate audit procedures referred to
above could include the followingbull 1048696 Attending or arranging for another auditor to attend
the third partyrsquos inventory count
Inventory
bull 1048696 Obtaining another auditorrsquos report on the adequacy of the third partyrsquos internal control for ensuring
bull that inventory is properly counted and adequately safeguarded
bull 1048696 Inspecting documentation in respect of third party inventory (eg warehouse receipts)
bull 1048696 Requesting confirmation from other parties when inventory has been pledged as collateral
2 Payroll
1) Tests of control
bull Test sample of time sheet clock cards for approval by responsible official
bull 1048696 Observe wages distribution to ensure right person collect right pay
bull 1048696 Test authorization of payroll amendments bull 1048696 Examine evidence of checking payroll calculation bull 1048696 Examine evidence of approval bull 1048696 Examine evidence independence checks of payroll bull 1048696 Test controls over unclaimed wages bull 1048696 Examine explanation for variance
Payroll
bull 2)Substantive tests bull Substantive tests in respect of payroll focus primarily
on whether or not expenses have been overstated as a result of
bull 1048696 Payments being made to fictitious employees
bull Genuine employees being paid for hours they have not worked
bull 1048696 Inappropriate rate
Payrollbull The main tests are as follows bull 1 analytical review bull 1048696 compare with production level sales level bull 1048696 Compare levels of payroll throughout the year on a
month-by-month basis bull 1048696 Check leavers and joiners changes in the rates of
pay bull 2 test cast and calculation bull 3 test samples of personnel records for rate of pay
authorization of changes leavers` and joiners` detail
Payroll
bull 4 Cut-off test bull 5 select sample check to time records test to
personnel records test cast and calculations with reference to tax
bull 6 test posting of payroll to general ledger account bull 7 test total cheques to net pay(PAYE)
Inventory
bull 2 ) Accounting for inventorybull The valuation and disclosure rules for inventory are
laid down in IAS 2 Inventories Inventory should bebull valued at the lower of cost and net realisable valuebull Production costs (costs of conversion) includebull (a) Costs specifically attributable to units of
productionbull (b) Production overheadsbull (c) Other overheads attributable to bringing the
Inventory product or service to its present location and
condition
3) Audit procedures for inventory
Audit objectives
(1) completeness
(2) existence
(3) right and obligation
(4) valuation and allocation
(5) cut-off
(6) accuracy
(7) occurrence and right and obligation
Inventory
4) The physical inventory count
bull ISA 501 Audit evidence ndash specific considerations for selected items provides guidance to auditors on attending the physical inventory count to obtain evidence regarding the existence and condition of inventory
bull It states that where inventory is material auditors shall obtain sufficient appropriate audit evidence regarding its existence and condition by attending the physical inventory count (unless this is impracticable)
Inventory
to do the following
bull Evaluate managementrsquos instructions and procedures for recording and controlling the result of the physical inventory count
bull 1048696 Observe the performance of the count proceduresbull 1048696 Inspect the inventorybull 1048696 Perform test countsbull Factors to consider when planning attendance at the
inventory count include the following
Inventory
bull The risks of material misstatement of inventory
bull 1048696 Internal controls related to inventory
bull 1048696 Whether adequate procedures are expected to be established and proper instructions issued for counting
bull 1048696 The timing of the count
bull 1048696 Whether the entity maintains a perpetual inventory system
bull 1048696 Locations at which inventory is held (including materiality at different locations)
bull 1048696 Whether the assistance of an auditorrsquos expert is required
Inventory
bull (1) The inventory count
bull A business may count inventory by one or a combination of the following methods
bull (a) Physical inventory counts at the year-end
bull (b) Physical inventory counts before or after the year-end
bull (c) Perpetual (or continuous) inventory where management has a programme of inventory-counting throughout the year
bull If perpetual inventory counting is used auditors will verify that management
bull (a) Ensures that all inventory lines are counted at least once a year
Inventory
bull (b) Maintains adequate inventory records that are kept up-to-date
bull (c) Has satisfactory procedures for inventory counts and test-counting
bull (d) Investigates and corrects all material differencesbull (2) Planning attendance at inventory count
bull Before the physical inventory count the auditors should ensure audit coverage of the count is appropriate and that the clients count instructions have been reviewed
(3) Attendance at inventory count
Inventory
bull The auditors working papers should include
bull 1048696 Details of their observations and tests
bull 1048696 The manner in which points that are relevant and material to the inventory being counted or
bull measured have been dealt with by the client
bull 1048696 Instances where the clients procedures have not been satisfactorily carried out
bull 1048696 Items for subsequent testing such as photocopies of (or extracts from) rough inventory sheets
bull 1048696 Details of the sequence of inventory sheets
bull 1048696 The auditors conclusions
Inventory
bull (4) After the inventory countbull After the count the auditors should check that final
inventory sheets have been properly compiled from count records and that book inventory has been appropriately adjusted
bull (5)Inventory held by third partiesbull Where the entity has inventory that is held by third
parties and which is material to the financial
statements the auditor shall obtain sufficient appropriate audit evidence by performing one or both of the following
Inventory
bull Direct confirmation from the third party regarding quantities and condition (in accordance with
bull ISA 505 External confirmations)bull 1048696 Inspection or other appropriate audit procedures (if
third partyrsquos integrity and objectivity arebull doubtful for example)bull The other appropriate audit procedures referred to
above could include the followingbull 1048696 Attending or arranging for another auditor to attend
the third partyrsquos inventory count
Inventory
bull 1048696 Obtaining another auditorrsquos report on the adequacy of the third partyrsquos internal control for ensuring
bull that inventory is properly counted and adequately safeguarded
bull 1048696 Inspecting documentation in respect of third party inventory (eg warehouse receipts)
bull 1048696 Requesting confirmation from other parties when inventory has been pledged as collateral
2 Payroll
1) Tests of control
bull Test sample of time sheet clock cards for approval by responsible official
bull 1048696 Observe wages distribution to ensure right person collect right pay
bull 1048696 Test authorization of payroll amendments bull 1048696 Examine evidence of checking payroll calculation bull 1048696 Examine evidence of approval bull 1048696 Examine evidence independence checks of payroll bull 1048696 Test controls over unclaimed wages bull 1048696 Examine explanation for variance
Payroll
bull 2)Substantive tests bull Substantive tests in respect of payroll focus primarily
on whether or not expenses have been overstated as a result of
bull 1048696 Payments being made to fictitious employees
bull Genuine employees being paid for hours they have not worked
bull 1048696 Inappropriate rate
Payrollbull The main tests are as follows bull 1 analytical review bull 1048696 compare with production level sales level bull 1048696 Compare levels of payroll throughout the year on a
month-by-month basis bull 1048696 Check leavers and joiners changes in the rates of
pay bull 2 test cast and calculation bull 3 test samples of personnel records for rate of pay
authorization of changes leavers` and joiners` detail
Payroll
bull 4 Cut-off test bull 5 select sample check to time records test to
personnel records test cast and calculations with reference to tax
bull 6 test posting of payroll to general ledger account bull 7 test total cheques to net pay(PAYE)
Inventory product or service to its present location and
condition
3) Audit procedures for inventory
Audit objectives
(1) completeness
(2) existence
(3) right and obligation
(4) valuation and allocation
(5) cut-off
(6) accuracy
(7) occurrence and right and obligation
Inventory
4) The physical inventory count
bull ISA 501 Audit evidence ndash specific considerations for selected items provides guidance to auditors on attending the physical inventory count to obtain evidence regarding the existence and condition of inventory
bull It states that where inventory is material auditors shall obtain sufficient appropriate audit evidence regarding its existence and condition by attending the physical inventory count (unless this is impracticable)
Inventory
to do the following
bull Evaluate managementrsquos instructions and procedures for recording and controlling the result of the physical inventory count
bull 1048696 Observe the performance of the count proceduresbull 1048696 Inspect the inventorybull 1048696 Perform test countsbull Factors to consider when planning attendance at the
inventory count include the following
Inventory
bull The risks of material misstatement of inventory
bull 1048696 Internal controls related to inventory
bull 1048696 Whether adequate procedures are expected to be established and proper instructions issued for counting
bull 1048696 The timing of the count
bull 1048696 Whether the entity maintains a perpetual inventory system
bull 1048696 Locations at which inventory is held (including materiality at different locations)
bull 1048696 Whether the assistance of an auditorrsquos expert is required
Inventory
bull (1) The inventory count
bull A business may count inventory by one or a combination of the following methods
bull (a) Physical inventory counts at the year-end
bull (b) Physical inventory counts before or after the year-end
bull (c) Perpetual (or continuous) inventory where management has a programme of inventory-counting throughout the year
bull If perpetual inventory counting is used auditors will verify that management
bull (a) Ensures that all inventory lines are counted at least once a year
Inventory
bull (b) Maintains adequate inventory records that are kept up-to-date
bull (c) Has satisfactory procedures for inventory counts and test-counting
bull (d) Investigates and corrects all material differencesbull (2) Planning attendance at inventory count
bull Before the physical inventory count the auditors should ensure audit coverage of the count is appropriate and that the clients count instructions have been reviewed
(3) Attendance at inventory count
Inventory
bull The auditors working papers should include
bull 1048696 Details of their observations and tests
bull 1048696 The manner in which points that are relevant and material to the inventory being counted or
bull measured have been dealt with by the client
bull 1048696 Instances where the clients procedures have not been satisfactorily carried out
bull 1048696 Items for subsequent testing such as photocopies of (or extracts from) rough inventory sheets
bull 1048696 Details of the sequence of inventory sheets
bull 1048696 The auditors conclusions
Inventory
bull (4) After the inventory countbull After the count the auditors should check that final
inventory sheets have been properly compiled from count records and that book inventory has been appropriately adjusted
bull (5)Inventory held by third partiesbull Where the entity has inventory that is held by third
parties and which is material to the financial
statements the auditor shall obtain sufficient appropriate audit evidence by performing one or both of the following
Inventory
bull Direct confirmation from the third party regarding quantities and condition (in accordance with
bull ISA 505 External confirmations)bull 1048696 Inspection or other appropriate audit procedures (if
third partyrsquos integrity and objectivity arebull doubtful for example)bull The other appropriate audit procedures referred to
above could include the followingbull 1048696 Attending or arranging for another auditor to attend
the third partyrsquos inventory count
Inventory
bull 1048696 Obtaining another auditorrsquos report on the adequacy of the third partyrsquos internal control for ensuring
bull that inventory is properly counted and adequately safeguarded
bull 1048696 Inspecting documentation in respect of third party inventory (eg warehouse receipts)
bull 1048696 Requesting confirmation from other parties when inventory has been pledged as collateral
2 Payroll
1) Tests of control
bull Test sample of time sheet clock cards for approval by responsible official
bull 1048696 Observe wages distribution to ensure right person collect right pay
bull 1048696 Test authorization of payroll amendments bull 1048696 Examine evidence of checking payroll calculation bull 1048696 Examine evidence of approval bull 1048696 Examine evidence independence checks of payroll bull 1048696 Test controls over unclaimed wages bull 1048696 Examine explanation for variance
Payroll
bull 2)Substantive tests bull Substantive tests in respect of payroll focus primarily
on whether or not expenses have been overstated as a result of
bull 1048696 Payments being made to fictitious employees
bull Genuine employees being paid for hours they have not worked
bull 1048696 Inappropriate rate
Payrollbull The main tests are as follows bull 1 analytical review bull 1048696 compare with production level sales level bull 1048696 Compare levels of payroll throughout the year on a
month-by-month basis bull 1048696 Check leavers and joiners changes in the rates of
pay bull 2 test cast and calculation bull 3 test samples of personnel records for rate of pay
authorization of changes leavers` and joiners` detail
Payroll
bull 4 Cut-off test bull 5 select sample check to time records test to
personnel records test cast and calculations with reference to tax
bull 6 test posting of payroll to general ledger account bull 7 test total cheques to net pay(PAYE)
Inventory
4) The physical inventory count
bull ISA 501 Audit evidence ndash specific considerations for selected items provides guidance to auditors on attending the physical inventory count to obtain evidence regarding the existence and condition of inventory
bull It states that where inventory is material auditors shall obtain sufficient appropriate audit evidence regarding its existence and condition by attending the physical inventory count (unless this is impracticable)
Inventory
to do the following
bull Evaluate managementrsquos instructions and procedures for recording and controlling the result of the physical inventory count
bull 1048696 Observe the performance of the count proceduresbull 1048696 Inspect the inventorybull 1048696 Perform test countsbull Factors to consider when planning attendance at the
inventory count include the following
Inventory
bull The risks of material misstatement of inventory
bull 1048696 Internal controls related to inventory
bull 1048696 Whether adequate procedures are expected to be established and proper instructions issued for counting
bull 1048696 The timing of the count
bull 1048696 Whether the entity maintains a perpetual inventory system
bull 1048696 Locations at which inventory is held (including materiality at different locations)
bull 1048696 Whether the assistance of an auditorrsquos expert is required
Inventory
bull (1) The inventory count
bull A business may count inventory by one or a combination of the following methods
bull (a) Physical inventory counts at the year-end
bull (b) Physical inventory counts before or after the year-end
bull (c) Perpetual (or continuous) inventory where management has a programme of inventory-counting throughout the year
bull If perpetual inventory counting is used auditors will verify that management
bull (a) Ensures that all inventory lines are counted at least once a year
Inventory
bull (b) Maintains adequate inventory records that are kept up-to-date
bull (c) Has satisfactory procedures for inventory counts and test-counting
bull (d) Investigates and corrects all material differencesbull (2) Planning attendance at inventory count
bull Before the physical inventory count the auditors should ensure audit coverage of the count is appropriate and that the clients count instructions have been reviewed
(3) Attendance at inventory count
Inventory
bull The auditors working papers should include
bull 1048696 Details of their observations and tests
bull 1048696 The manner in which points that are relevant and material to the inventory being counted or
bull measured have been dealt with by the client
bull 1048696 Instances where the clients procedures have not been satisfactorily carried out
bull 1048696 Items for subsequent testing such as photocopies of (or extracts from) rough inventory sheets
bull 1048696 Details of the sequence of inventory sheets
bull 1048696 The auditors conclusions
Inventory
bull (4) After the inventory countbull After the count the auditors should check that final
inventory sheets have been properly compiled from count records and that book inventory has been appropriately adjusted
bull (5)Inventory held by third partiesbull Where the entity has inventory that is held by third
parties and which is material to the financial
statements the auditor shall obtain sufficient appropriate audit evidence by performing one or both of the following
Inventory
bull Direct confirmation from the third party regarding quantities and condition (in accordance with
bull ISA 505 External confirmations)bull 1048696 Inspection or other appropriate audit procedures (if
third partyrsquos integrity and objectivity arebull doubtful for example)bull The other appropriate audit procedures referred to
above could include the followingbull 1048696 Attending or arranging for another auditor to attend
the third partyrsquos inventory count
Inventory
bull 1048696 Obtaining another auditorrsquos report on the adequacy of the third partyrsquos internal control for ensuring
bull that inventory is properly counted and adequately safeguarded
bull 1048696 Inspecting documentation in respect of third party inventory (eg warehouse receipts)
bull 1048696 Requesting confirmation from other parties when inventory has been pledged as collateral
2 Payroll
1) Tests of control
bull Test sample of time sheet clock cards for approval by responsible official
bull 1048696 Observe wages distribution to ensure right person collect right pay
bull 1048696 Test authorization of payroll amendments bull 1048696 Examine evidence of checking payroll calculation bull 1048696 Examine evidence of approval bull 1048696 Examine evidence independence checks of payroll bull 1048696 Test controls over unclaimed wages bull 1048696 Examine explanation for variance
Payroll
bull 2)Substantive tests bull Substantive tests in respect of payroll focus primarily
on whether or not expenses have been overstated as a result of
bull 1048696 Payments being made to fictitious employees
bull Genuine employees being paid for hours they have not worked
bull 1048696 Inappropriate rate
Payrollbull The main tests are as follows bull 1 analytical review bull 1048696 compare with production level sales level bull 1048696 Compare levels of payroll throughout the year on a
month-by-month basis bull 1048696 Check leavers and joiners changes in the rates of
pay bull 2 test cast and calculation bull 3 test samples of personnel records for rate of pay
authorization of changes leavers` and joiners` detail
Payroll
bull 4 Cut-off test bull 5 select sample check to time records test to
personnel records test cast and calculations with reference to tax
bull 6 test posting of payroll to general ledger account bull 7 test total cheques to net pay(PAYE)
Inventory
to do the following
bull Evaluate managementrsquos instructions and procedures for recording and controlling the result of the physical inventory count
bull 1048696 Observe the performance of the count proceduresbull 1048696 Inspect the inventorybull 1048696 Perform test countsbull Factors to consider when planning attendance at the
inventory count include the following
Inventory
bull The risks of material misstatement of inventory
bull 1048696 Internal controls related to inventory
bull 1048696 Whether adequate procedures are expected to be established and proper instructions issued for counting
bull 1048696 The timing of the count
bull 1048696 Whether the entity maintains a perpetual inventory system
bull 1048696 Locations at which inventory is held (including materiality at different locations)
bull 1048696 Whether the assistance of an auditorrsquos expert is required
Inventory
bull (1) The inventory count
bull A business may count inventory by one or a combination of the following methods
bull (a) Physical inventory counts at the year-end
bull (b) Physical inventory counts before or after the year-end
bull (c) Perpetual (or continuous) inventory where management has a programme of inventory-counting throughout the year
bull If perpetual inventory counting is used auditors will verify that management
bull (a) Ensures that all inventory lines are counted at least once a year
Inventory
bull (b) Maintains adequate inventory records that are kept up-to-date
bull (c) Has satisfactory procedures for inventory counts and test-counting
bull (d) Investigates and corrects all material differencesbull (2) Planning attendance at inventory count
bull Before the physical inventory count the auditors should ensure audit coverage of the count is appropriate and that the clients count instructions have been reviewed
(3) Attendance at inventory count
Inventory
bull The auditors working papers should include
bull 1048696 Details of their observations and tests
bull 1048696 The manner in which points that are relevant and material to the inventory being counted or
bull measured have been dealt with by the client
bull 1048696 Instances where the clients procedures have not been satisfactorily carried out
bull 1048696 Items for subsequent testing such as photocopies of (or extracts from) rough inventory sheets
bull 1048696 Details of the sequence of inventory sheets
bull 1048696 The auditors conclusions
Inventory
bull (4) After the inventory countbull After the count the auditors should check that final
inventory sheets have been properly compiled from count records and that book inventory has been appropriately adjusted
bull (5)Inventory held by third partiesbull Where the entity has inventory that is held by third
parties and which is material to the financial
statements the auditor shall obtain sufficient appropriate audit evidence by performing one or both of the following
Inventory
bull Direct confirmation from the third party regarding quantities and condition (in accordance with
bull ISA 505 External confirmations)bull 1048696 Inspection or other appropriate audit procedures (if
third partyrsquos integrity and objectivity arebull doubtful for example)bull The other appropriate audit procedures referred to
above could include the followingbull 1048696 Attending or arranging for another auditor to attend
the third partyrsquos inventory count
Inventory
bull 1048696 Obtaining another auditorrsquos report on the adequacy of the third partyrsquos internal control for ensuring
bull that inventory is properly counted and adequately safeguarded
bull 1048696 Inspecting documentation in respect of third party inventory (eg warehouse receipts)
bull 1048696 Requesting confirmation from other parties when inventory has been pledged as collateral
2 Payroll
1) Tests of control
bull Test sample of time sheet clock cards for approval by responsible official
bull 1048696 Observe wages distribution to ensure right person collect right pay
bull 1048696 Test authorization of payroll amendments bull 1048696 Examine evidence of checking payroll calculation bull 1048696 Examine evidence of approval bull 1048696 Examine evidence independence checks of payroll bull 1048696 Test controls over unclaimed wages bull 1048696 Examine explanation for variance
Payroll
bull 2)Substantive tests bull Substantive tests in respect of payroll focus primarily
on whether or not expenses have been overstated as a result of
bull 1048696 Payments being made to fictitious employees
bull Genuine employees being paid for hours they have not worked
bull 1048696 Inappropriate rate
Payrollbull The main tests are as follows bull 1 analytical review bull 1048696 compare with production level sales level bull 1048696 Compare levels of payroll throughout the year on a
month-by-month basis bull 1048696 Check leavers and joiners changes in the rates of
pay bull 2 test cast and calculation bull 3 test samples of personnel records for rate of pay
authorization of changes leavers` and joiners` detail
Payroll
bull 4 Cut-off test bull 5 select sample check to time records test to
personnel records test cast and calculations with reference to tax
bull 6 test posting of payroll to general ledger account bull 7 test total cheques to net pay(PAYE)
Inventory
bull The risks of material misstatement of inventory
bull 1048696 Internal controls related to inventory
bull 1048696 Whether adequate procedures are expected to be established and proper instructions issued for counting
bull 1048696 The timing of the count
bull 1048696 Whether the entity maintains a perpetual inventory system
bull 1048696 Locations at which inventory is held (including materiality at different locations)
bull 1048696 Whether the assistance of an auditorrsquos expert is required
Inventory
bull (1) The inventory count
bull A business may count inventory by one or a combination of the following methods
bull (a) Physical inventory counts at the year-end
bull (b) Physical inventory counts before or after the year-end
bull (c) Perpetual (or continuous) inventory where management has a programme of inventory-counting throughout the year
bull If perpetual inventory counting is used auditors will verify that management
bull (a) Ensures that all inventory lines are counted at least once a year
Inventory
bull (b) Maintains adequate inventory records that are kept up-to-date
bull (c) Has satisfactory procedures for inventory counts and test-counting
bull (d) Investigates and corrects all material differencesbull (2) Planning attendance at inventory count
bull Before the physical inventory count the auditors should ensure audit coverage of the count is appropriate and that the clients count instructions have been reviewed
(3) Attendance at inventory count
Inventory
bull The auditors working papers should include
bull 1048696 Details of their observations and tests
bull 1048696 The manner in which points that are relevant and material to the inventory being counted or
bull measured have been dealt with by the client
bull 1048696 Instances where the clients procedures have not been satisfactorily carried out
bull 1048696 Items for subsequent testing such as photocopies of (or extracts from) rough inventory sheets
bull 1048696 Details of the sequence of inventory sheets
bull 1048696 The auditors conclusions
Inventory
bull (4) After the inventory countbull After the count the auditors should check that final
inventory sheets have been properly compiled from count records and that book inventory has been appropriately adjusted
bull (5)Inventory held by third partiesbull Where the entity has inventory that is held by third
parties and which is material to the financial
statements the auditor shall obtain sufficient appropriate audit evidence by performing one or both of the following
Inventory
bull Direct confirmation from the third party regarding quantities and condition (in accordance with
bull ISA 505 External confirmations)bull 1048696 Inspection or other appropriate audit procedures (if
third partyrsquos integrity and objectivity arebull doubtful for example)bull The other appropriate audit procedures referred to
above could include the followingbull 1048696 Attending or arranging for another auditor to attend
the third partyrsquos inventory count
Inventory
bull 1048696 Obtaining another auditorrsquos report on the adequacy of the third partyrsquos internal control for ensuring
bull that inventory is properly counted and adequately safeguarded
bull 1048696 Inspecting documentation in respect of third party inventory (eg warehouse receipts)
bull 1048696 Requesting confirmation from other parties when inventory has been pledged as collateral
2 Payroll
1) Tests of control
bull Test sample of time sheet clock cards for approval by responsible official
bull 1048696 Observe wages distribution to ensure right person collect right pay
bull 1048696 Test authorization of payroll amendments bull 1048696 Examine evidence of checking payroll calculation bull 1048696 Examine evidence of approval bull 1048696 Examine evidence independence checks of payroll bull 1048696 Test controls over unclaimed wages bull 1048696 Examine explanation for variance
Payroll
bull 2)Substantive tests bull Substantive tests in respect of payroll focus primarily
on whether or not expenses have been overstated as a result of
bull 1048696 Payments being made to fictitious employees
bull Genuine employees being paid for hours they have not worked
bull 1048696 Inappropriate rate
Payrollbull The main tests are as follows bull 1 analytical review bull 1048696 compare with production level sales level bull 1048696 Compare levels of payroll throughout the year on a
month-by-month basis bull 1048696 Check leavers and joiners changes in the rates of
pay bull 2 test cast and calculation bull 3 test samples of personnel records for rate of pay
authorization of changes leavers` and joiners` detail
Payroll
bull 4 Cut-off test bull 5 select sample check to time records test to
personnel records test cast and calculations with reference to tax
bull 6 test posting of payroll to general ledger account bull 7 test total cheques to net pay(PAYE)
Inventory
bull (1) The inventory count
bull A business may count inventory by one or a combination of the following methods
bull (a) Physical inventory counts at the year-end
bull (b) Physical inventory counts before or after the year-end
bull (c) Perpetual (or continuous) inventory where management has a programme of inventory-counting throughout the year
bull If perpetual inventory counting is used auditors will verify that management
bull (a) Ensures that all inventory lines are counted at least once a year
Inventory
bull (b) Maintains adequate inventory records that are kept up-to-date
bull (c) Has satisfactory procedures for inventory counts and test-counting
bull (d) Investigates and corrects all material differencesbull (2) Planning attendance at inventory count
bull Before the physical inventory count the auditors should ensure audit coverage of the count is appropriate and that the clients count instructions have been reviewed
(3) Attendance at inventory count
Inventory
bull The auditors working papers should include
bull 1048696 Details of their observations and tests
bull 1048696 The manner in which points that are relevant and material to the inventory being counted or
bull measured have been dealt with by the client
bull 1048696 Instances where the clients procedures have not been satisfactorily carried out
bull 1048696 Items for subsequent testing such as photocopies of (or extracts from) rough inventory sheets
bull 1048696 Details of the sequence of inventory sheets
bull 1048696 The auditors conclusions
Inventory
bull (4) After the inventory countbull After the count the auditors should check that final
inventory sheets have been properly compiled from count records and that book inventory has been appropriately adjusted
bull (5)Inventory held by third partiesbull Where the entity has inventory that is held by third
parties and which is material to the financial
statements the auditor shall obtain sufficient appropriate audit evidence by performing one or both of the following
Inventory
bull Direct confirmation from the third party regarding quantities and condition (in accordance with
bull ISA 505 External confirmations)bull 1048696 Inspection or other appropriate audit procedures (if
third partyrsquos integrity and objectivity arebull doubtful for example)bull The other appropriate audit procedures referred to
above could include the followingbull 1048696 Attending or arranging for another auditor to attend
the third partyrsquos inventory count
Inventory
bull 1048696 Obtaining another auditorrsquos report on the adequacy of the third partyrsquos internal control for ensuring
bull that inventory is properly counted and adequately safeguarded
bull 1048696 Inspecting documentation in respect of third party inventory (eg warehouse receipts)
bull 1048696 Requesting confirmation from other parties when inventory has been pledged as collateral
2 Payroll
1) Tests of control
bull Test sample of time sheet clock cards for approval by responsible official
bull 1048696 Observe wages distribution to ensure right person collect right pay
bull 1048696 Test authorization of payroll amendments bull 1048696 Examine evidence of checking payroll calculation bull 1048696 Examine evidence of approval bull 1048696 Examine evidence independence checks of payroll bull 1048696 Test controls over unclaimed wages bull 1048696 Examine explanation for variance
Payroll
bull 2)Substantive tests bull Substantive tests in respect of payroll focus primarily
on whether or not expenses have been overstated as a result of
bull 1048696 Payments being made to fictitious employees
bull Genuine employees being paid for hours they have not worked
bull 1048696 Inappropriate rate
Payrollbull The main tests are as follows bull 1 analytical review bull 1048696 compare with production level sales level bull 1048696 Compare levels of payroll throughout the year on a
month-by-month basis bull 1048696 Check leavers and joiners changes in the rates of
pay bull 2 test cast and calculation bull 3 test samples of personnel records for rate of pay
authorization of changes leavers` and joiners` detail
Payroll
bull 4 Cut-off test bull 5 select sample check to time records test to
personnel records test cast and calculations with reference to tax
bull 6 test posting of payroll to general ledger account bull 7 test total cheques to net pay(PAYE)
Inventory
bull (b) Maintains adequate inventory records that are kept up-to-date
bull (c) Has satisfactory procedures for inventory counts and test-counting
bull (d) Investigates and corrects all material differencesbull (2) Planning attendance at inventory count
bull Before the physical inventory count the auditors should ensure audit coverage of the count is appropriate and that the clients count instructions have been reviewed
(3) Attendance at inventory count
Inventory
bull The auditors working papers should include
bull 1048696 Details of their observations and tests
bull 1048696 The manner in which points that are relevant and material to the inventory being counted or
bull measured have been dealt with by the client
bull 1048696 Instances where the clients procedures have not been satisfactorily carried out
bull 1048696 Items for subsequent testing such as photocopies of (or extracts from) rough inventory sheets
bull 1048696 Details of the sequence of inventory sheets
bull 1048696 The auditors conclusions
Inventory
bull (4) After the inventory countbull After the count the auditors should check that final
inventory sheets have been properly compiled from count records and that book inventory has been appropriately adjusted
bull (5)Inventory held by third partiesbull Where the entity has inventory that is held by third
parties and which is material to the financial
statements the auditor shall obtain sufficient appropriate audit evidence by performing one or both of the following
Inventory
bull Direct confirmation from the third party regarding quantities and condition (in accordance with
bull ISA 505 External confirmations)bull 1048696 Inspection or other appropriate audit procedures (if
third partyrsquos integrity and objectivity arebull doubtful for example)bull The other appropriate audit procedures referred to
above could include the followingbull 1048696 Attending or arranging for another auditor to attend
the third partyrsquos inventory count
Inventory
bull 1048696 Obtaining another auditorrsquos report on the adequacy of the third partyrsquos internal control for ensuring
bull that inventory is properly counted and adequately safeguarded
bull 1048696 Inspecting documentation in respect of third party inventory (eg warehouse receipts)
bull 1048696 Requesting confirmation from other parties when inventory has been pledged as collateral
2 Payroll
1) Tests of control
bull Test sample of time sheet clock cards for approval by responsible official
bull 1048696 Observe wages distribution to ensure right person collect right pay
bull 1048696 Test authorization of payroll amendments bull 1048696 Examine evidence of checking payroll calculation bull 1048696 Examine evidence of approval bull 1048696 Examine evidence independence checks of payroll bull 1048696 Test controls over unclaimed wages bull 1048696 Examine explanation for variance
Payroll
bull 2)Substantive tests bull Substantive tests in respect of payroll focus primarily
on whether or not expenses have been overstated as a result of
bull 1048696 Payments being made to fictitious employees
bull Genuine employees being paid for hours they have not worked
bull 1048696 Inappropriate rate
Payrollbull The main tests are as follows bull 1 analytical review bull 1048696 compare with production level sales level bull 1048696 Compare levels of payroll throughout the year on a
month-by-month basis bull 1048696 Check leavers and joiners changes in the rates of
pay bull 2 test cast and calculation bull 3 test samples of personnel records for rate of pay
authorization of changes leavers` and joiners` detail
Payroll
bull 4 Cut-off test bull 5 select sample check to time records test to
personnel records test cast and calculations with reference to tax
bull 6 test posting of payroll to general ledger account bull 7 test total cheques to net pay(PAYE)
(3) Attendance at inventory count
Inventory
bull The auditors working papers should include
bull 1048696 Details of their observations and tests
bull 1048696 The manner in which points that are relevant and material to the inventory being counted or
bull measured have been dealt with by the client
bull 1048696 Instances where the clients procedures have not been satisfactorily carried out
bull 1048696 Items for subsequent testing such as photocopies of (or extracts from) rough inventory sheets
bull 1048696 Details of the sequence of inventory sheets
bull 1048696 The auditors conclusions
Inventory
bull (4) After the inventory countbull After the count the auditors should check that final
inventory sheets have been properly compiled from count records and that book inventory has been appropriately adjusted
bull (5)Inventory held by third partiesbull Where the entity has inventory that is held by third
parties and which is material to the financial
statements the auditor shall obtain sufficient appropriate audit evidence by performing one or both of the following
Inventory
bull Direct confirmation from the third party regarding quantities and condition (in accordance with
bull ISA 505 External confirmations)bull 1048696 Inspection or other appropriate audit procedures (if
third partyrsquos integrity and objectivity arebull doubtful for example)bull The other appropriate audit procedures referred to
above could include the followingbull 1048696 Attending or arranging for another auditor to attend
the third partyrsquos inventory count
Inventory
bull 1048696 Obtaining another auditorrsquos report on the adequacy of the third partyrsquos internal control for ensuring
bull that inventory is properly counted and adequately safeguarded
bull 1048696 Inspecting documentation in respect of third party inventory (eg warehouse receipts)
bull 1048696 Requesting confirmation from other parties when inventory has been pledged as collateral
2 Payroll
1) Tests of control
bull Test sample of time sheet clock cards for approval by responsible official
bull 1048696 Observe wages distribution to ensure right person collect right pay
bull 1048696 Test authorization of payroll amendments bull 1048696 Examine evidence of checking payroll calculation bull 1048696 Examine evidence of approval bull 1048696 Examine evidence independence checks of payroll bull 1048696 Test controls over unclaimed wages bull 1048696 Examine explanation for variance
Payroll
bull 2)Substantive tests bull Substantive tests in respect of payroll focus primarily
on whether or not expenses have been overstated as a result of
bull 1048696 Payments being made to fictitious employees
bull Genuine employees being paid for hours they have not worked
bull 1048696 Inappropriate rate
Payrollbull The main tests are as follows bull 1 analytical review bull 1048696 compare with production level sales level bull 1048696 Compare levels of payroll throughout the year on a
month-by-month basis bull 1048696 Check leavers and joiners changes in the rates of
pay bull 2 test cast and calculation bull 3 test samples of personnel records for rate of pay
authorization of changes leavers` and joiners` detail
Payroll
bull 4 Cut-off test bull 5 select sample check to time records test to
personnel records test cast and calculations with reference to tax
bull 6 test posting of payroll to general ledger account bull 7 test total cheques to net pay(PAYE)
Inventory
bull The auditors working papers should include
bull 1048696 Details of their observations and tests
bull 1048696 The manner in which points that are relevant and material to the inventory being counted or
bull measured have been dealt with by the client
bull 1048696 Instances where the clients procedures have not been satisfactorily carried out
bull 1048696 Items for subsequent testing such as photocopies of (or extracts from) rough inventory sheets
bull 1048696 Details of the sequence of inventory sheets
bull 1048696 The auditors conclusions
Inventory
bull (4) After the inventory countbull After the count the auditors should check that final
inventory sheets have been properly compiled from count records and that book inventory has been appropriately adjusted
bull (5)Inventory held by third partiesbull Where the entity has inventory that is held by third
parties and which is material to the financial
statements the auditor shall obtain sufficient appropriate audit evidence by performing one or both of the following
Inventory
bull Direct confirmation from the third party regarding quantities and condition (in accordance with
bull ISA 505 External confirmations)bull 1048696 Inspection or other appropriate audit procedures (if
third partyrsquos integrity and objectivity arebull doubtful for example)bull The other appropriate audit procedures referred to
above could include the followingbull 1048696 Attending or arranging for another auditor to attend
the third partyrsquos inventory count
Inventory
bull 1048696 Obtaining another auditorrsquos report on the adequacy of the third partyrsquos internal control for ensuring
bull that inventory is properly counted and adequately safeguarded
bull 1048696 Inspecting documentation in respect of third party inventory (eg warehouse receipts)
bull 1048696 Requesting confirmation from other parties when inventory has been pledged as collateral
2 Payroll
1) Tests of control
bull Test sample of time sheet clock cards for approval by responsible official
bull 1048696 Observe wages distribution to ensure right person collect right pay
bull 1048696 Test authorization of payroll amendments bull 1048696 Examine evidence of checking payroll calculation bull 1048696 Examine evidence of approval bull 1048696 Examine evidence independence checks of payroll bull 1048696 Test controls over unclaimed wages bull 1048696 Examine explanation for variance
Payroll
bull 2)Substantive tests bull Substantive tests in respect of payroll focus primarily
on whether or not expenses have been overstated as a result of
bull 1048696 Payments being made to fictitious employees
bull Genuine employees being paid for hours they have not worked
bull 1048696 Inappropriate rate
Payrollbull The main tests are as follows bull 1 analytical review bull 1048696 compare with production level sales level bull 1048696 Compare levels of payroll throughout the year on a
month-by-month basis bull 1048696 Check leavers and joiners changes in the rates of
pay bull 2 test cast and calculation bull 3 test samples of personnel records for rate of pay
authorization of changes leavers` and joiners` detail
Payroll
bull 4 Cut-off test bull 5 select sample check to time records test to
personnel records test cast and calculations with reference to tax
bull 6 test posting of payroll to general ledger account bull 7 test total cheques to net pay(PAYE)
Inventory
bull (4) After the inventory countbull After the count the auditors should check that final
inventory sheets have been properly compiled from count records and that book inventory has been appropriately adjusted
bull (5)Inventory held by third partiesbull Where the entity has inventory that is held by third
parties and which is material to the financial
statements the auditor shall obtain sufficient appropriate audit evidence by performing one or both of the following
Inventory
bull Direct confirmation from the third party regarding quantities and condition (in accordance with
bull ISA 505 External confirmations)bull 1048696 Inspection or other appropriate audit procedures (if
third partyrsquos integrity and objectivity arebull doubtful for example)bull The other appropriate audit procedures referred to
above could include the followingbull 1048696 Attending or arranging for another auditor to attend
the third partyrsquos inventory count
Inventory
bull 1048696 Obtaining another auditorrsquos report on the adequacy of the third partyrsquos internal control for ensuring
bull that inventory is properly counted and adequately safeguarded
bull 1048696 Inspecting documentation in respect of third party inventory (eg warehouse receipts)
bull 1048696 Requesting confirmation from other parties when inventory has been pledged as collateral
2 Payroll
1) Tests of control
bull Test sample of time sheet clock cards for approval by responsible official
bull 1048696 Observe wages distribution to ensure right person collect right pay
bull 1048696 Test authorization of payroll amendments bull 1048696 Examine evidence of checking payroll calculation bull 1048696 Examine evidence of approval bull 1048696 Examine evidence independence checks of payroll bull 1048696 Test controls over unclaimed wages bull 1048696 Examine explanation for variance
Payroll
bull 2)Substantive tests bull Substantive tests in respect of payroll focus primarily
on whether or not expenses have been overstated as a result of
bull 1048696 Payments being made to fictitious employees
bull Genuine employees being paid for hours they have not worked
bull 1048696 Inappropriate rate
Payrollbull The main tests are as follows bull 1 analytical review bull 1048696 compare with production level sales level bull 1048696 Compare levels of payroll throughout the year on a
month-by-month basis bull 1048696 Check leavers and joiners changes in the rates of
pay bull 2 test cast and calculation bull 3 test samples of personnel records for rate of pay
authorization of changes leavers` and joiners` detail
Payroll
bull 4 Cut-off test bull 5 select sample check to time records test to
personnel records test cast and calculations with reference to tax
bull 6 test posting of payroll to general ledger account bull 7 test total cheques to net pay(PAYE)
Inventory
bull Direct confirmation from the third party regarding quantities and condition (in accordance with
bull ISA 505 External confirmations)bull 1048696 Inspection or other appropriate audit procedures (if
third partyrsquos integrity and objectivity arebull doubtful for example)bull The other appropriate audit procedures referred to
above could include the followingbull 1048696 Attending or arranging for another auditor to attend
the third partyrsquos inventory count
Inventory
bull 1048696 Obtaining another auditorrsquos report on the adequacy of the third partyrsquos internal control for ensuring
bull that inventory is properly counted and adequately safeguarded
bull 1048696 Inspecting documentation in respect of third party inventory (eg warehouse receipts)
bull 1048696 Requesting confirmation from other parties when inventory has been pledged as collateral
2 Payroll
1) Tests of control
bull Test sample of time sheet clock cards for approval by responsible official
bull 1048696 Observe wages distribution to ensure right person collect right pay
bull 1048696 Test authorization of payroll amendments bull 1048696 Examine evidence of checking payroll calculation bull 1048696 Examine evidence of approval bull 1048696 Examine evidence independence checks of payroll bull 1048696 Test controls over unclaimed wages bull 1048696 Examine explanation for variance
Payroll
bull 2)Substantive tests bull Substantive tests in respect of payroll focus primarily
on whether or not expenses have been overstated as a result of
bull 1048696 Payments being made to fictitious employees
bull Genuine employees being paid for hours they have not worked
bull 1048696 Inappropriate rate
Payrollbull The main tests are as follows bull 1 analytical review bull 1048696 compare with production level sales level bull 1048696 Compare levels of payroll throughout the year on a
month-by-month basis bull 1048696 Check leavers and joiners changes in the rates of
pay bull 2 test cast and calculation bull 3 test samples of personnel records for rate of pay
authorization of changes leavers` and joiners` detail
Payroll
bull 4 Cut-off test bull 5 select sample check to time records test to
personnel records test cast and calculations with reference to tax
bull 6 test posting of payroll to general ledger account bull 7 test total cheques to net pay(PAYE)
Inventory
bull 1048696 Obtaining another auditorrsquos report on the adequacy of the third partyrsquos internal control for ensuring
bull that inventory is properly counted and adequately safeguarded
bull 1048696 Inspecting documentation in respect of third party inventory (eg warehouse receipts)
bull 1048696 Requesting confirmation from other parties when inventory has been pledged as collateral
2 Payroll
1) Tests of control
bull Test sample of time sheet clock cards for approval by responsible official
bull 1048696 Observe wages distribution to ensure right person collect right pay
bull 1048696 Test authorization of payroll amendments bull 1048696 Examine evidence of checking payroll calculation bull 1048696 Examine evidence of approval bull 1048696 Examine evidence independence checks of payroll bull 1048696 Test controls over unclaimed wages bull 1048696 Examine explanation for variance
Payroll
bull 2)Substantive tests bull Substantive tests in respect of payroll focus primarily
on whether or not expenses have been overstated as a result of
bull 1048696 Payments being made to fictitious employees
bull Genuine employees being paid for hours they have not worked
bull 1048696 Inappropriate rate
Payrollbull The main tests are as follows bull 1 analytical review bull 1048696 compare with production level sales level bull 1048696 Compare levels of payroll throughout the year on a
month-by-month basis bull 1048696 Check leavers and joiners changes in the rates of
pay bull 2 test cast and calculation bull 3 test samples of personnel records for rate of pay
authorization of changes leavers` and joiners` detail
Payroll
bull 4 Cut-off test bull 5 select sample check to time records test to
personnel records test cast and calculations with reference to tax
bull 6 test posting of payroll to general ledger account bull 7 test total cheques to net pay(PAYE)
2 Payroll
1) Tests of control
bull Test sample of time sheet clock cards for approval by responsible official
bull 1048696 Observe wages distribution to ensure right person collect right pay
bull 1048696 Test authorization of payroll amendments bull 1048696 Examine evidence of checking payroll calculation bull 1048696 Examine evidence of approval bull 1048696 Examine evidence independence checks of payroll bull 1048696 Test controls over unclaimed wages bull 1048696 Examine explanation for variance
Payroll
bull 2)Substantive tests bull Substantive tests in respect of payroll focus primarily
on whether or not expenses have been overstated as a result of
bull 1048696 Payments being made to fictitious employees
bull Genuine employees being paid for hours they have not worked
bull 1048696 Inappropriate rate
Payrollbull The main tests are as follows bull 1 analytical review bull 1048696 compare with production level sales level bull 1048696 Compare levels of payroll throughout the year on a
month-by-month basis bull 1048696 Check leavers and joiners changes in the rates of
pay bull 2 test cast and calculation bull 3 test samples of personnel records for rate of pay
authorization of changes leavers` and joiners` detail
Payroll
bull 4 Cut-off test bull 5 select sample check to time records test to
personnel records test cast and calculations with reference to tax
bull 6 test posting of payroll to general ledger account bull 7 test total cheques to net pay(PAYE)
Payroll
bull 2)Substantive tests bull Substantive tests in respect of payroll focus primarily
on whether or not expenses have been overstated as a result of
bull 1048696 Payments being made to fictitious employees
bull Genuine employees being paid for hours they have not worked
bull 1048696 Inappropriate rate
Payrollbull The main tests are as follows bull 1 analytical review bull 1048696 compare with production level sales level bull 1048696 Compare levels of payroll throughout the year on a
month-by-month basis bull 1048696 Check leavers and joiners changes in the rates of
pay bull 2 test cast and calculation bull 3 test samples of personnel records for rate of pay
authorization of changes leavers` and joiners` detail
Payroll
bull 4 Cut-off test bull 5 select sample check to time records test to
personnel records test cast and calculations with reference to tax
bull 6 test posting of payroll to general ledger account bull 7 test total cheques to net pay(PAYE)
Payrollbull The main tests are as follows bull 1 analytical review bull 1048696 compare with production level sales level bull 1048696 Compare levels of payroll throughout the year on a
month-by-month basis bull 1048696 Check leavers and joiners changes in the rates of
pay bull 2 test cast and calculation bull 3 test samples of personnel records for rate of pay
authorization of changes leavers` and joiners` detail
Payroll
bull 4 Cut-off test bull 5 select sample check to time records test to
personnel records test cast and calculations with reference to tax
bull 6 test posting of payroll to general ledger account bull 7 test total cheques to net pay(PAYE)
Payroll
bull 4 Cut-off test bull 5 select sample check to time records test to
personnel records test cast and calculations with reference to tax
bull 6 test posting of payroll to general ledger account bull 7 test total cheques to net pay(PAYE)