AUDIT PROCEDURES
CONTENT:
1. Investment & Finance
2. Inventory Cycle
3. Property, Plant & Equipment
4. Computer Auditing
5. Materiality
6. Internal controls
7. Human Resources and Payroll Cycle
8. Expenditure Cycle
9. Bank and Cash
10. Revenue Cycle
11. Provision for Bad Debts
, 1. Investment & Finance
Investment in Shares
Initial procedures
Obtain a schedule of balances
Cast and cross cast for mathematical accuracy
Scan the schedule for unusual amounts or descriptions
Agree opening the balance to prior year's working papers (closing balance)
Agree the closing balance to trial balance, general ledger and AFS.
Obtain a management representation letter
Analytical procedures
Compare balances month-on-month and follow up on discrepancies
Compare amounts at and beginning and end of financial year and follow up
General procedures
Inspect directors' minutes of meetings to ensure investments properly
authorised
Obtain policy valuing for investments
Ensure policy being is applied consistently
For investments bought or sold in current year, trace payment or
receipt to bank statement,
Inspect relevant documentation's date
- Strate documentation
- Shareholders' register
- Purchase or sale agreement.
,Existence
Send a confirmation letter to Strate confirming or shareholding at year
end for listed shares
Inquire of management or determine from Strate if any shares are
pledged and inspect loan agreements
Accuracy
Inspect financial statement to ensure amount/ value of shares
per IFR59 and specify method
If acquired or investment in prior years, confirm opening
balance to prior year working papers.
Any investment sold or acquired in current year, confirm price
or cost by inspecting purchase or sale agreement.
Investments sold in current year - inspect journal entries for
correct derecognition as per IFRS 9
Valuation
Listed shares - obtain share prices at year end JSE listings.
Unlisted shares - obtain directors/ expert valuation (expert
procedures if used)
Recalculate any gains and losses on investments and trace
through to SOCI
Dividends Received from Investing (must give procedures for dividend received if asked
for all procedures over investing)
Vouch dividend declared FS of a valid media announcement
Recalculate dividend receive of number of shares owned x dividend per share
Inspect bank statement to ensure dividend was received
- Trace amount to general ledger to ensure accounted for correctly
, Inspect whether shares purchased are cum. dividend or ex. dividend from
purchase agreement.
- Ensure treatment is correct
Loans taken out
Specific analytics
Compare prior year, budgeted and industry norms to actuals
- debt: equity
- debt total: assets
- interest expense: debt
Inspect loan agreement, for name of borrower, amount, interest rate,
payment terms, signatories and security
review minutes of meetings with directors to ensure loan properly
authorised.
review memorandum of incorporation and ensure there are no restrictions
on company taking out a loan and special terms are complied with
inspect financial statement to ensure that disclosure is correct
- correct split - between current and non-current liabilities
Confirm loan with the bank, name of borrower and amount outstanding at
year end.
Interest paid
Recalculate interest as per loan agreement terms.
Inspect bank statement to ensure payment.
Trace payment to journal entries to ensure correct records.
Inspect SOCI to ensure interest has been disclosed and expensed correctly
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