CLIENT:
AUDIT PROGRAM
___________________________________________________
PERIOD:
___________________________________________________
SUBJECT:
INVESTMENTS
Est.
Hrs.
Phase/
Level
Procedures
AUDIT OBJECTIVES
To determine whether:
A.
B.
C.
D.
The balances reflect a complete listing of investments,
and the Company’s ownership of such assets is
evidenced by securities or other appropriate legal
documents either physically on hand or held in
safekeeping by others.
Assets values and investment income or loss,
valuation allowances, and gains or losses on sales of
investments are appropriately recorded and presented.
Investments are properly described and classified in
the balance sheet, and disclosures have been made for
any restrictions, pledges, or liens against the assets
and adequate disclosures have been made in
accordance with Companies Ordinance, 1984 Banking
Companies ordinanceand/or other laws and
regulations and relevant IAS.
Ensure that investments made during the year are in
accordance with the objects of the Company.
SUBSTANTIVE PROCEDURES
1. Overall analytical procedures
1.1
1.2
1.3
1.4
Obtain listing of all the investments held by the client,
categorizing by:
 held for trading;
 held to maturity;
 available for sale; and
 investment property.
Compare the balance of each significant investment
with the comparable balance for the preceding period.
Investigate significant or unusual fluctuations.
Compare changes in investment balances with
information regarding dividends or earnings of the
investee, which would normally affect the carrying
amounts.
Review the reasonableness of current year income
from securities and any realized gains or losses from
sales of securities. Also review treatment of
unrealized
gains
or
losses.
(Scope/Sample:______________________)
D/AP
W/P
Ref.
By
Comments/Explanations
CLIENT:
AUDIT PROGRAM
___________________________________________________
PERIOD:
___________________________________________________
SUBJECT:
INVESTMENTS
Est.
Hrs.
Phase/
Level
Procedures
2. Physical verification and confirmation
2.1
2.2
2.3
2.4
Carryout physical verifications of investments at year
end, in case where investments are held within the
entity or with third party for safe custody.
Examine stock certificate or other documentation
(e.g., partnership or joint venture agreement) that
provide evidence of ownership.
Obtain confirmation, where investments are held by a
third party as security against any fund borrowed or
are held for physical safeguard where for any reason,
physical count could not be carried out and upon
receipt cross refer and update confirmation control
sheet.
Confirm ownership with a transfer agent/registrar or
the investee. Note that confirmation of ownership
with the investee would be appropriate only if the
investee cannot be significantly influenced by the
investor.
3. Recognition and measurement
3.1
3.2
3.3
For the purpose of recognition of investments ensure
that following have been complied with:
 For initial recognition these are recorded at cost
which is the fair value of consideration given.
 For subsequent measurement of held to
maturity investments, ensure that these are
measured at amortized cost.
For subsequent measurement of held for trading and
available for sale investments, ensure that these are
measured at fair value.
Ensure that gain or loss:
 on remeasurement to fair value of investments
held for trading is included in net profit or loss
for the period in which it arises;
 arising on remeasurement to fair value is
included in statement of changes in equity or
in the net profit and loss account in the period
in case of available for sale investments;
 is recognized in net profit or loss only when
the investment is de-recognized or impaired in
case of investments held to maturity carried at
amortized cost.
D/AP
W/P
Ref.
By
Comments/Explanations
CLIENT:
AUDIT PROGRAM
___________________________________________________
PERIOD:
___________________________________________________
SUBJECT:
INVESTMENTS
Est.
Hrs.
Phase/
Level
Procedures
3.4
3.5
3.6
3.7
3.8
3.9
3.10
3.11
3.12
Obtain or prepare an analysis of activity during the
year in the securities portfolio separated by
classification type (trading, held to maturity or
available for sale). Test the clerical accuracy of the
analysis. Trace the opening balances to the adjusted
prior year working trial balance and the ending
balances to the current year’s working trial balance.
For significant investments, particularly unlisted
securities obtain the investee’s latest audited financial
statements and review them for items of audit
significance (e.g. incurrence of operating losses,
deteriorating financial condition, significant litigation,
other contingencies, etc.).
Assess the financial statement impact of any items of
audit significance noted in our review. In case of nonlisted companies, obtain latest financial statements of
such companies to determine the break-up value for
the purpose of valuation. Also determine the market
value of similar listed securities of similar companies
in accordance with para 99 and 100 of IAS-39.
If the investee’s audited financial statements are
examined by other auditors and they are significant to
the client’s financial statements, complete Standard
form for “Using the Work of Other Auditors Practice
Aid.”
If latest audited financial statements are not available
for any significant investee, assess the need to extend
the scope of our audit work to the investee’s financial
statements.
In the year of acquisition of an investment, review the
underlying data and evidence as to the accuracy of the
amounts and the propriety of the carrying values.
Consider the effects (if any) of taxes on the
undistributed earnings of the investees and foreign
currency fluctuations and translations during the audit
period.
Verify market value of listed securities investments
from Stock Exchange quotations.
Ensure that in the first year of adoption of IAS-39, the
requirements of paragraph 172(d) have been properly
fulfilled with respect to initial adoption i.e.,
identification of financial assets that are to be
measured at fair value and those that are to be
measured at amortized cost. Also ensure that any
adjustment of the previous carrying amount is
recognized as an adjustment of the balance of retained
earnings at the beginning of the financial year in
which the standard is initially applied.
D/AP
W/P
Ref.
By
Comments/Explanations
CLIENT:
AUDIT PROGRAM
___________________________________________________
PERIOD:
___________________________________________________
SUBJECT:
INVESTMENTS
Est.
Hrs.
Phase/
Level
Procedures
3.13
3.14
3.15
3.16
3.17
3.18
3.19
3.20
For local purposes ensure accuracy of amortisation of
differences
of purchase/resale
or
sale/repo
transactions.
Select randomly, transactions from the investment
ledger regarding Repos and Reverse Repos.
Obtain deal slips file from bank in order to check the
base price, Repo/Reverse Repo price, rate of mark-up
tenor of transaction, brokerage, yield etc, from
contract.
Obtain contract of brokerage, if any, and check that
both the sale price and purchase price are properly
reflected in the contract. Also, test check the
calculation of brokerage paid.
Ensure that intimation to the SBP is made through
SGL letter at the date of transaction as well as at the
date of maturity for movement of underlying
securities.
Check that approval of Repo’s are in accordance with
the approval powers of the branch.
Check that vouchers are made at both the dates viz.
Contract date, maturity date and payments / receipts
made accordingly.
For outstanding Repos/Reverse Repos at interim date,
ensure that balances are confirmed by the counter
party by means of direct confirmation to us. Inquire
into differences, if any. Also obtain SGL accounts
confirmation from SBP.
4. Movement during the Period
4.1
4.2
4.3
Determine that all transfers between the portfolios
have been properly recorded in accordance with
management’s authorization and note pertinent
information for the client representation letter.
Compare distributions received for investments in
partnerships and joint ventures with the terms of the
agreement to determine any changes to the agreement
occurred during the period.
Have the client prepare an analysis of the activity or
changes in the investments accounts during the
current period. Verify the clerical accuracy of the
analysis and test it as follows:
D/AP
W/P
Ref.
By
Comments/Explanations
CLIENT:
AUDIT PROGRAM
___________________________________________________
PERIOD:
___________________________________________________
SUBJECT:
INVESTMENTS
Est.
Hrs.
Phase/
Level
Procedures


Determine that earnings, dividends or other
distributions of investees were properly
accounted for during the period.
Trace activity to supporting documentation or
financial statements of the investees for the
current period. Recalculate amounts of
investment income recorded.
5. Subsidiary/Associated/Joint Ventures
5.1
5.2
5.3
Have the client prepare an analysis detailing the
relationship of the individual audit unit to all of its
investees, including joint ventures, partnerships and
other companies.
Analyze investee agreements to determine how an
increase or decrease in net assets of the investee will
affect cash payments to the investor over the life of
the investee and upon its liquidation.
Evaluate whether the specified profit and loss
allocation to record the investor’s equity in the
investee’s earnings reasonably reflects the allocation
of cash and liquidating distributions over the term of
the agreement.
6. Pledges and Charges
6.1
Ensure that no investments of the Company have been
pledged in the financial institutions for securing loan
to any of its associated undertaking otherwise than by
a special resolution to this effect.
7. Corporate Compliance
7.1
7.2
7.3
In case of investments in subsidiaries and associated
undertakings, ensure that requirements of Section 208
of the Companies Ordinance, 1984, have been
complied with.
Verify that the investments are held in the Company’s
own name and if not, then check that the investments
are held in the name of the individuals as allowed in
Section 209 of the Companies Ordinance, 1984.
Ensure that the powers are exercised by the Board of
Directors on behalf of the company and decisions on
material transactions or significant matters are
documented by a resolution passed at a meeting of the
Board in respect of investment and disinvestments of
funds, except in the case of banking companies, trusts,
mutual funds and insurance companies.
D/AP
W/P
Ref.
By
Comments/Explanations
CLIENT:
AUDIT PROGRAM
___________________________________________________
PERIOD:
___________________________________________________
SUBJECT:
INVESTMENTS
Est.
Hrs.
Phase/
Level
W/P
Ref.
Procedures
8. Investment – Income
8.1
8.2
8.3
Vouch the cost of significant purchases and the
proceeds from significant sales. Recompute the gain
or loss from the sale of securities. Trace receipts in
bank statements.
Test the reasonableness of the current year dividend
and interest income from investment. Inspect
published sources for dividends declared. Determine
if dividends receivable should be accrued.
Determine that the unrealized gain or loss on the
trading and available for sale portfolio has been
properly classified in the income statement / statement
of changes in equity.
9. Impairment
Determine that any permanent impairment in value of
securities available for sale or held to maturity has
been properly recognized and accounted for.
10. Investment Property
10.1
10.2
Ensure that the company has complied with the
requirement of IAS-40 in connection with the
valuation of its property, plant and equipment under
fair value model and cost model.
In case of fair value model, consider applicability of
steps performed for verification of “revaluation of
fixed assets” wherever applicable.
11. Change
in
Accounting
11.1
11.2
11.3
Accounting
Policy/Method
of
Discuss with client personnel any changes in
circumstances that require a change in the method of
accounting for an investment. Discuss such changes
with the partner and manager and determine whether
they are reasonable.
Determine whether the accounting has been properly
applied.
Obtain written representation from management
concerning any change in their intentions regarding
the investment (e.g., temporary versus long-term) or
ability to exercise influence.
Other tests as deemed necessary
D/AP
By
Comments/Explanations
CLIENT:
AUDIT PROGRAM
___________________________________________________
PERIOD:
___________________________________________________
SUBJECT:
INVESTMENTS
Est.
Hrs.
Phase/
Level
Procedures
Management Letter
Prepare management letter points including:
 Internal control weaknesses;
 Business improvement opportunities;
 Legal non-compliance;
 Accounting system deficiencies; and
 Errors and irregularities not material at the
financial statements level.
Disclosure
Ensure appropriate disclosure have been made in
accordance with the reporting framework and fill
relevant portion of FSDCL.
Supervision, review and conclusion
1.
2.
3.
4.
Perform Senior review and supervision.
Resolve Senior review points.
Resolve Partner and Manager review points.
Conclude response to the audit objectives.
D/AP
W/P
Ref.
By
Comments/Explanations
CLIENT:
AUDIT PROGRAM
___________________________________________________
PERIOD:
___________________________________________________
SUBJECT:
INVESTMENTS
Est.
Hrs.
Phase/
Level
D/AP
W/P
Ref.
Procedures
By
Comments/Explanations
Audit conclusion
Based on the substantive test procedures, I/we performed as outlined above, it is my/our opinion that the audit objectives set forth at
the beginning of this audit program have been achieved, except as follows:
___________________________________________________________________________________________________________
___________________________________________________________________________________________________________
___________________________________________________________________________________________________________
Date:____________
_______________
Signature
____________
Job Incharge
________
Manager
_______
Partner