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)

• Slide 1
• Slide 2
• Slide 3
• Slide 4
• Slide 5
• Slide 6
• Slide 7
• Slide 8
• Slide 9
• Slide 10
• Slide 11
• Slide 12
• Slide 13
• Slide 14
• Slide 15
• Slide 16
• Slide 17
• Slide 18
• Slide 19
• Slide 20

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)

• Slide 1
• Slide 2
• Slide 3
• Slide 4
• Slide 5
• Slide 6
• Slide 7
• Slide 8
• Slide 9
• Slide 10
• Slide 11
• Slide 12
• Slide 13
• Slide 14
• Slide 15
• Slide 16
• Slide 17
• Slide 18
• Slide 19
• Slide 20

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)

• Slide 1
• Slide 2
• Slide 3
• Slide 4
• Slide 5
• Slide 6
• Slide 7
• Slide 8
• Slide 9
• Slide 10
• Slide 11
• Slide 12
• Slide 13
• Slide 14
• Slide 15
• Slide 16
• Slide 17
• Slide 18
• Slide 19
• Slide 20

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)

• Slide 1
• Slide 2
• Slide 3
• Slide 4
• Slide 5
• Slide 6
• Slide 7
• Slide 8
• Slide 9
• Slide 10
• Slide 11
• Slide 12
• Slide 13
• Slide 14
• Slide 15
• Slide 16
• Slide 17
• Slide 18
• Slide 19
• Slide 20

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)

• Slide 1
• Slide 2
• Slide 3
• Slide 4
• Slide 5
• Slide 6
• Slide 7
• Slide 8
• Slide 9
• Slide 10
• Slide 11
• Slide 12
• Slide 13
• Slide 14
• Slide 15
• Slide 16
• Slide 17
• Slide 18
• Slide 19
• Slide 20

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)

• Slide 1
• Slide 2
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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)

• Slide 1
• Slide 2
• Slide 3
• Slide 4
• Slide 5
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• Slide 7
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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)

• Slide 1
• Slide 2
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• Slide 4
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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)

• Slide 1
• Slide 2
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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)

• Slide 1
• Slide 2
• Slide 3
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• Slide 18
• Slide 19
• Slide 20

(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)

• Slide 1
• Slide 2
• Slide 3
• Slide 4
• Slide 5
• Slide 6
• Slide 7
• Slide 8
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• Slide 10
• Slide 11
• Slide 12
• Slide 13
• Slide 14
• Slide 15
• Slide 16
• Slide 17
• Slide 18
• Slide 19
• Slide 20

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)

• Slide 1
• Slide 2
• Slide 3
• Slide 4
• Slide 5
• Slide 6
• Slide 7
• Slide 8
• Slide 9
• Slide 10
• Slide 11
• Slide 12
• Slide 13
• Slide 14
• Slide 15
• Slide 16
• Slide 17
• Slide 18
• Slide 19
• Slide 20

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)

• Slide 1
• Slide 2
• Slide 3
• Slide 4
• Slide 5
• Slide 6
• Slide 7
• Slide 8
• Slide 9
• Slide 10
• Slide 11
• Slide 12
• Slide 13
• Slide 14
• Slide 15
• Slide 16
• Slide 17
• Slide 18
• Slide 19
• Slide 20

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)

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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)

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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)

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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)

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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)

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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)

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