Audit Program (c) Investments (subsidiaries, associates, and others) Client: Period: Subject: WP Ref.: Prepared by: Date: Reviewed by Date Investments (subsidiaries, associates, and others) Amount in Rs. Account balances: Investments In subsidiaries and associates Held to maturity Available for sale Held for trading Classes of transactions: Dividend Interest Gain/ loss on revaluation Gain/ loss on disposal S. No. 1. Audit Objectives Investments are completely and accurately recorded. Assertions CA 2. All recorded investments actually exist. E 3. All investments are appropriately valued. V 4. All investments are owned by the client and title is also in the name of client. R Dividend and interest income, gain/ loss on revaluation and gain/ loss on disposal has been accurately calculated, completely recorded and appropriately disclosed. OCATL 5. 6. Investments are presented and all disclosures have been given in accordance with the Fourth Schedule of the Companies Ordinance, 1984 and relevant IASs. OCAL RVU Risk Assessment IR CR ROSM S. No. Audit Procedures Objective 1. Assess the reasonableness of design of system of internal control by enquiring relevant client personnel and documenting the same (if not a documented system manual has been developed by the client). A walk through test would be necessary to confirm the understanding as documented. Identify the preventive (exercised before incurrence of transactions and event) and detective (exercised after incurrence of transactions and event) controls established by management to support its assertions. ALL 2. Check on sample of selected transactions covering the whole period that all preventive controls are exercised on all transactions. ALL 3. Check that proper subsidiary records have been maintained and entries are made in the same on prompt and consistent basis after proper approval and appropriate authorisation. ALL 4. Check on a sample of transactions that detective controls have appropriately been exercised and in case of any detection of error/ fraud, proper steps have been taken to avoid recurrence of the same. CE 5. All investments in subsidiaries and associates should with the board's specific approval and in accordance with requirements of section 208 of the Companies Ordinance, 1984. Laws and Rgulation Test of Controls Done by W. P. Ref. S. No. 6. 7. Audit Procedures Objective Ensure that management does not override the designed controls by Enquiring from the designated staff person Remain skeptical during performing test of design and test of effective operation Document the conclusion after performing test of controls and required level of assurance from substantive procedures. N/A Analytical Procedures 1. Document logical commercial reasons for major additions and disposal made during the year AU 2. Compare current year balances and income with last year amounts and ensure that any significant variation should be properly and logically reasoned. CEA Test of Details 1. Obtain a movement schedule of investments (shares, TFCs and PIBs) both for numbers and amounts. 2. Trace the opening balances from the general ledger, subsidiary records, and last year working papers. CE C Done by W. P. Ref. S. No. 3. Audit Procedures Trace the carrying value of selected investments to supporting documents e.g. (a) Broker's notes for investments purchased in the current year, to confirm date of purchase description and number of shares. (b) Carrying costs in our prior year’s working papers Objective E 4. Check the computation of valuation of investments in subsidiaries, joint ventures and associates is made as per the accounting policies of the company. V 5. Obtain and recompute amortisation schedule and check its accuracy for fixed interest securities whether purchased at premium or discount. OCAL 6. Re-perform the marked to market valuation of PIBs and TFCs at year-end to check the valuation of these securities. V 7. Where any lien marked on the investments, check the disclosure thereof. U 8. Perform cut-off at year-end. T 9. Check redemptions of principal during the year and obtain supports to ascertain the overdue instalments. Check if such payments were as per the terms of the redemption agreement. EV 10. Check that brokerage expenses are accurately recorded. AO Done by W. P. Ref. S. No. 11. Audit Procedures For selected shares disposed of during the year: (a) Examine supporting documents of investments sold e.g. brokers notes and cash receipts records. (b) Confirm the date of disposal, description, and number of shares. (c) Calculate the gain or loss on sale of investment and trace the amount transferred to the profit and loss account. Objective COA 12. Test the casting and cross casting of the schedule. CE 13. Obtain the schedule of capital gain earned / interest income received during the year and vouch few transactions on test basis. O 14. Check the accrual of interest and amortization of premium / discount on fixed income securities with the one calculated on IRR basis. CVT 15. Ensure that closing balances of investments in working papers agree with the general ledger. N/A 16. For investments held by client at period end, perform the following: RE (a) Physically inspect selected securities held by the client. (b) For selected securities not held by the client, circularize confirmation requests to the custodian. Compare replies to recorded investments. Done by W. P. Ref. S. No. 17. 18. Audit Procedures For selected investments, compute market value as under: (a) For quoted investments, trace market value from independent published quotations. (b) For unquoted investments, calculate breakup value of shares from respective company's financial statements. Ensure that investments are presented and all disclosures have been given in accordance with the Fourth Schedule of the Companies Ordinance, 1984 and relevant IASs. As per IAS 39 all investments should be properly classified in Held for trading, available for sale and held to maturity. Objective V OCAL RVU Investment Income 19. Obtain a schedule showing opening and closing balances of accrued income and income earned and received during the year CE 20. Trace opening balance of accrued income from general ledger/ trial balance. 21 Ensure that accrual of dividend income is made only where AGM is held before yearyen. RA 22. Ensure proper accounting treatment of bonus share received and right shares subscribed. V 23. Make a selection of accruals and examine documents supporting the amounts of investment income (e.g. rates from published quotations, dividend warrants). E 24. Examine subsequent receipts of income accrued at period-end. EV 25. Ensure that closing balances of accrued income in working papers agree with general ledger. N/A C Done by W. P. Ref.