Audit Procedure 1
Audit Procedure
Institution Affiliation
Name
Date
Audit Procedure 2
Findings of SIR consistent with KPMG’s doubts
In the case of Serba Dinamik there was only one response out of the 12 that were sent out. In
such scenarios, alternative procedures are applied to non-responses to reduce the audit risk to
an acceptable level. The nature of the level of the alternative procedure varies with the risk
and the assertions in question. Reperformance may be carried out where the auditor examines
subsequent receipts, shipping documents, or any other document that can prove the existence
of an assertion. Reperformance is carried out to confirm whether the numbers in the financial
statement tally with the available documents that are available such as invoices, contracts etc.
With respect to the creditor’s examination for the subsequent cash disbursements, the
respective creditors should be carried out to determine whether the evidence can be used to
ascertain the completeness of the assertion (Chong, 2012). If the application of alternative
procedures is not sufficient, the auditor should extend other tests such as a test of details and
analytical procedures.
Scope 2: Local suppliers
The auditor is required to ascertain the existence of debtors. If there is no confirmation through
emails or letters, an auditor is allowed to visit the location as per the address given by the
management. Such audit procedures are referred to as physical examinations. It aims to
establish the existence of the provided assets in the financial statements or the existence of the
debtor or creditor who is considered to be a third party to the firms’ operations (Chong, 2012).
In establishing the non-existence of some of the offices and firms declared as debtors an auditor
can conclude there are fraud cases that the management involved. Since the management only
provided two contacts of the 10 suppliers in question. The auditor, therefore, could not ascertain
the validity of the suppliers and the value that was recorded in the financial statements since
the firms were non-existence.
Scope 3: IT contracts
The revenue reported by firms in IT contracts differed between the auditing firms. The net
profit reported by the firm was 16.1 million while the customers were entitled to 15.2 million
which means the reported profit was 0.9 million. To determine the actual profit to be reported
the auditor will have to recalculate the revenue given the contracts that the supplier and the
customers had with the firm. In the recalculation procedure, the auditor needs to examine all
income that the firm has (Karmazina, 2022). The sources of revenue that need to be determined
in order to include them are the recalculation. The challenge in this scenario is the nonexistence of some of the customers and some suppliers who are carrying out transactions with
the firm. In re-calculation, the auditor needs to determine illegal numbers that have been
included, and what to include or exempt which will result in different results when carried out
by different teams.
Scope 4: Bahrain customer and supplier
With KPMG establishing the supplier does not exist, EY Consulting also cast their doubt
existence of such a supplier. Since the firm could not give accurate information about a
supplier, the transaction of $12 million would not be included in the firm’s statements. Having
established there is no such supplier, the auditor would determine the impact of the $12 million
on the financial statement. Reperformance will enable the auditor to determine the impact as
well as raise pertinent questions to the management (Karmazina, 2022). For example, if such a
customer does not exist where did the deliveries come from and who receives the payment for
the delivery? By establishing such suppliers or customers do not exist, the auditor will be able
to make a conclusion and determination on the opinion to release on the audited reports. KPMG
Audit Procedure 3
determined that it could not ascertain the validity of the purchases, and the sales transactions
having established the supplier to be non-existing. Other procedures will not be necessary given
the auditor has established the location and address does not exist therefore, such transaction
can be reported as fraud by the management.
References
Chong, G. (2012). Detecting Fraud. Journal Of Corporate Accounting &Amp; Finance, 24(2),
47-53. https://doi.org/10.1002/jcaf.21829
Karmazina, N. (2022). AUDIT PROCEDURES IN ASSESSING THE IMPACT OF
SUBSEQUENT
EVENTS
IN
THE
AUDIT
OF
FINANCIAL
STATEMENTS. Ekonomika Ta Derzhava, (4), 8. https://doi.org/10.32702/23066806.2022.4.8