1-Pager [Updated for Autumn 2023]
Key Audit Procedures [Frequently Tested Areas]
Insurance Receivable
 Read Insurance Policy.
 Inspect communication.
 Record only if virtually certain.
Tangible Non-Current Assets
For Depreciation:
 Review Fixed Assets' Register.
 Recalculate depreciation on sample.
 Check estimates are reasonable (e.g. rate, life, residual
value). Engage Expert, if necessary.
 Review gain or losses on disposals
 Compare ratio of depreciation.
Litigations
 Inspect Communication.
 Written representation (on likely settlement).
 Effect of Subsequent events
 Possibility/Impact of regulatory action.
Warranty
 Inspect sales agreement.
 Check reasonableness of cost of warranty repair.
 Discuss nature of defect in inventory, and impact on
other areas.
 Subsequent events, and their impact on recognition.
 Written representation.
Loss by Fire/Flood
 Physically inspect location.
 Assess reasonableness of inventory/assets balance at
location.
 Appropriate accounting and disclosures (e.g.
Impairment, NRV, Loss). Use Expert, if needed.
Inventory count at other than B/S date
 Inventory count at other date.
 Prepare reconciliation.
 Inspect documents for intervening transactions.
Physical Verification not possible
Perform alternative procedures i.e.
 Inspect documents (e.g. GRN).
 Use technology (e.g. drone cameras, video calls)
Impairment of Fixed Assets
 Ask management to test impairment.
 Obtain working, review source data and assumptions to
check reasonableness.
 Use of expert to verify working.
Bankruptcy of a specific debtor
 Inspect agreement with customer, and check for security.
 Send confirmation letter to liquidator to confirm
expected recovery.
 Check subsequent collection, if any.
 Inquire management about expected recovery.
Trade Receivables
Procedures to ensure Provision for bad debts:
 Evaluate basis of provisioning.
 Aging analysis
 Subsequent clearance and write-off.
 Evaluate disputed receivable.
 Assess historical accuracy.
Trade Payables
Procedures to ensure Completeness:
 Cut-off on purchases.
 Inspect pending GRN.
 Subsequent clearance.
 Compare list of suppliers with last year.
 Compare account statement with relevant ledger account
For Impairment:
 Ask management to carry out impairment review.
 Check source data and assumptions of working.
 Physically inspect condition
 Engage expert, if necessary.
For Additions:
 Obtain list and agree with F/S.
 Inspect authorization
 Inspect sale deed etc.
 Inspect supplier’s invoice
 Check date of capitalization.
 Test calculation of depreciation [start when asset ready
for use]
 Physically inspect
 Re-assess useful life
For Disposal:
 Obtain list and agree with F/S.
 Inspect authorization.
 Inspect sale invoice etc.
 Verify removal from books and register.
 recalculate profit or loss.
 Inquire management possibility of unrecorded disposals.
For Revalued Asset:
1. Evaluate Competence, Capability and Objectivity of Expert.
2. Evaluate Adequacy of work of Expert.
3.Evaluate Accounting/Disclosures:
 Agree with valuer’s report.
 Valuation is up-to-date.
 Entire class revaluated.
 Evaluate method to ensure consistency.
 Recalculate revaluation surplus.
 Physically inspect condition.
 Appropriate disclosure.
 Written Representation (on reasonableness of
assumptions)
For Self-constructed Fixed Asset:
 Inspect permission of authorities
 Physical verification.
 For sample of cost, inspect Suppliers’ invoice, Payroll
records, and relevant evidence.
 Review list of capital expenditure.
 Discuss capitalization policy.
 Compare budget with actual cost.
 Expert’s assessment of stage of completion.
 Depreciation starts when asset is available for use.
 Presentation and Disclosures.
Reconciliations [Bank, Debtors, Creditors]
 Cast Reconciliation.
 Agree balance with GL and supporting record.
 For timing differences, check they are cleared in next
month.
 For specific errors/omission, perform specific
procedures.
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1-Pager [Updated for Autumn 2023]
Key Audit Procedures [Frequently Tested Areas]
Intangible Non-Current Assets
Goodwill:
 Inspect approval.
 Inspect sale agreement.
 Inspect due diligence report.
 Recalculation.
 Adequacy of disclosures.
For Amortization/Impairment:
 Understand management’s process.
 Check annual impairment testing.
 Evaluate appropriateness of assumptions used in
impairment testing.
 Engage expert, if necessary.
 Obtain written representation (about assumptions)
 Check valuation
Development Cost:
 Check recognition criteria (PIRATE).
 Discuss feasibility and obtain representation.
 Discuss any technical problem/ impairment.
 Review development cost for classification.
 Select a sample, and inspect supporting documents.
 Test controls over scientists’ documentation.
Other Intangibles:
 Inspect approval.
 Inspect legal documents.
 Check reasonableness of life.
 Discuss for impairment.
Inventory
NRV Valuation:
 Aging analysis.
 Check physical condition.
 Discuss increase in inventory.
 Ask management to carry out impairment review.
 Check source data and assumptions of working.
Stock Count at interim date:
 Physically verify at interim date.
 Obtain record of interim sales and purchases.
 Verify record with supporting document.
 Estimate closing stock.
Stock held with third parties:
 Obtain inventory report
 Visit location
 Engage component auditor.
 Send Confirmation Letter
Loan Agreement
 Read and check compliance.
 Ensure client is able to repay, or alternate arrangements.
 Check subsequent status (e.g. renewal)
Legal Case
 Read Board Minutes.
 Inspect case file.
 Letter to lawyer.
 Evaluate subsequent event.
 Review adequacy of provision and/or disclosures.
 Management Representation
Non-current assets held for sale
 Read minutes of board meeting to check approval to sell
assets.
 Review steps taken by management to sell the assets e.g.
any correspondence or agreement with prospective
buyer.
 Check whether non-current assets held for sale are
o
Measured at fair value.
o
Presented separately in balance sheet under
Current Assets.
o
No more depreciated.
 Obtain valuation report of expert to confirm fair value of
assets.
 Check that discontinued operations are separately
presented, and disclosed.
Provision for restructuring/ staff termination
 Obtain working papers prepared by client for
restructuring provision.
 Obtain list of redundant employees and ensure all of them
are included in calculation.
 Inquire from terminated employees regarding agreed
remuneration.
 Read minutes of board meeting to identify final
settlement with labour union etc.
Foreign Currency Transactions & Receivable/Payables
 Read contracts for in-transit Purchase/Sales Orders.
 Tests of Controls for correct translation of foreign
currency.
 Gain/loss on closing balances of foreign currency
recorded as income/expense.
Please note that:

This is a list of most important areas tested in exam, but not a complete list. You still have to read the chapter 10 &
11 in the book.

you can memorize procedures in Key Words, but have to write in exam in Complete Sentence Form.

In a Case Study, do not blindly reproduce audit procedures if whole area. You have to write only that part of the area
which is relevant to case.
Prepared by: Muhammad Asif, FCA
Assisted by: Atif Farooq
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