Question 4: Substantive Procedures and Audit Documentation
After the end of the financial year, Jane Owen performed transaction tests of the inventory purchases and cash disbursement. She summarised the audit procedures she performed in the following workpaper (reference N-2). To ensure audit quality, BDC has a review policy which helps to ensure that each audit document provides a clear and complete indication of the procedures that were performed and that adequate evidence has been collected. For this audit, you must review and approve all audit workpapers. If you find any unclarity or issues in a workpaper, the workpaper is returned to the appropriate staff auditor for necessary and appropriate revision
REQUIRED: Review the audit work papers below. Prepare Jane a list of the concerns that are present in her work papers. For each point raised, give explanations why the documentation is not appropriate
Client Cook’s Furniture Ltd
Financial year 30-Jun-20
Workpaper Inventory purchases and cash disbursements transactions
Reference N-2
Prepared by Jane Owen
Reviewed by Audit Manager
Date |
Payee |
Payment requisition number |
Amount $ |
Audit procedures |
4/07/2019 |
NAE Steel |
961 |
$ 12,610.47 |
√ ᴓ ◊ □ Ⅎ t u |
25/07/2019 |
NAE Steel |
1480 |
$ 391.05 |
√ ᴓ ◊ □ Ⅎ t u |
5/08/2019 |
NAE Steel |
2322 |
$ 4,210.40 |
√ ᴓ ◊ □ Ⅎ t u A |
13/09/2019 |
NAE Steel |
2568 |
$ 6,069.10 |
√ ᴓ ◊ □ Ⅎ t u B |
20/10/2019 |
NAE Steel |
3113 |
$ 841.70 |
√ ᴓ ◊ □ Ⅎ t u |
13/11/2019 |
NAE Steel |
3692 |
$ 7,018.45 |
√ ᴓ ◊ □ Ⅎ t u |
18/12/2019 |
NAE Steel |
4230 |
$ 2,295.40 |
√ ᴓ ◊ □ Ⅎ t u A |
6/01/2020 |
BM Hardware |
4493 |
$ 667.45 |
√ ᴓ ◊ □ Ⅎ t u |
5/02/2020 |
BM Hardware |
5020 |
$ 318.41 |
√ ᴓ ◊ □ Ⅎ t u |
26/03/2020 |
BM Hardware |
5554 |
$ 15,440.91 |
√ ᴓ ◊ □ Ⅎ t u |
18/04/2020 |
BM Hardware |
6009 |
$ 8,611.70 |
√ ᴓ ◊ □ Ⅎ t u |
16/06/2020 |
BM Hardware |
6681 |
$ 2,098.78 |
√ ᴓ ◊ □ Ⅎ t u |
Audit Objectives:
1. To verify that all products were properly ordered and received and is for legitimate business purposes
2. To verify that expenses and assets are properly valued and classified
3. To verify that cash disbursements are for legitimate commitments and properly approved. Scope:
Population all purchases from the inventory suppliers
Sample selected 12 disbursements for inventory purchases from two suppliers based on the cash disbursements journal. The two suppliers are selected because Cook’s furniture regularly buy from them.
Audit Procedures:
√) Traced to purchase invoice. Noted agreement with amount of payment and payment date. Each disbursement is 3% less than the invoice amount, representing the cash discount. All discounts were recalculated.
ᴓ) Compared invoice prices with Master price list or contracted price from new suppliers. All agreed except A
◊ )Examined supplier invoices for evidence that company employees verify prices, quantity and items. Marking or initials present in all cases.
□ )Verified mathematical accuracy of invoices
Ⅎ) Examined cancelled payment for amount, date, signature, endorsement and payee.
t )Trace delivery notes to inventory journal posting and journal numbers. All journal numbers are correctly referred on delivery notes and journals are accurately posted by the warehouse manager.
u) Examined purchase order for agreement with delivery note and invoice. Verified account code. All requisitions were properly approved except B.
Comments:
Conclusions: Purchases and cash disbursement transactions are fairly stated in all material respects.
Answer:
Get Answers For Free
Most questions answered within 1 hours.