Part Ten
Other Audit
Structure of Seminar
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1. Cash
2. Bank
3. Non-current assets
4. Non-current liabilities
1. Cash
1)Audit objectives for cash
• The following table demonstrates the audit objectives
for cash balances and how these are related to the
financial statement assertions relevant to this account
area. The audit procedures described in the remainder
of this chapter are undertaken to provide audit
evidence to support these financial statement
assertions.
Cash
• 2) Planning the cash count
• Planning is an essential element, as it is important
that all cash balances are counted at the same time as
far as possible. Cash in this context may include
unbanked cheques received, IOUs and credit card
slips, in addition to notes and coins.
• Planning decisions will need to be recorded on the
current audit file including:
• —The precise time of the count(s) and location(s)
• —The names of the audit staff conducting the counts
Cash
• —The names of the client staff intending to be
present at each location
• Where a location is not visited it may be appropriate
to obtain a letter from the client confirming the
balance.
3) Cash count
• The following matters apply to the count itself.
— All cash/petty cash books should be written up to
date in ink (or other permanent form) at the time of
the count.
Cash
— All balances must be counted at the same time.
— All negotiable securities must be available and
counted at the time the cash balances are counted.
— At no time should the auditors be left alone with
the cash and negotiable securities.
— All cash and securities counted must be recorded
on working papers subsequently filed on the current
audit file. Reconciliations should be prepared where
applicable .
2. Bank
1) Bank confirmation procedures
• The audit of bank balances will need to cover
completeness, existence, rights and obligations and
valuation. All of these assertions can be audited
directly by obtaining third party confirmations from
the client's banks and reconciling these with the
accounting records, having regard to cut-off.
• The audit objectives linking these assertions are as
follows:
— Recorded cash balances exist at the year-end
(existence)
Bank
— Recorded cash balances include the effects of all
transactions that occurred (completeness)
— Year-end transfers are recorded in the correct
period (cut-off)
— Recorded balances are realisable at the amounts
stated (valuation and allocation)
— The entity has legal title to all cash balances
shown at the year-end (rights and obligations)
Bank
2) Confirmation requests
• The auditors should decide from which bank or banks
to request confirmation, having regard to such matters
as size of balance, volume of activity, degree of
reliance on internal control, and materiality within the
context of the financial statements.
• The auditors should determine which of the following
approaches is the most appropriate in seeking
confirmation of balances or other information from
the bank:
Bank
— Listing balances and other information, and
requesting confirmation of their accuracy and
completeness, or
— Requesting details of balances and other
information, which can then be compared with the
requesting client's records
3)Audit plan for bank
3. Non-current assets
• Key areas when testing non-current assets are:
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Confirmation of ownership
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Inspection of non-current assets
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Valuation by third parties
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Adequacy of depreciation rates
• 1) Audit objectives for tangible non-current assets
Non-current assets
2)Internal control considerations
— The non-current asset register is a very important
aspect of the internal control system. It enables assets
to be identified, and comparisons between the general
ledger, non-current asset register and the assets
themselves provide evidence that the assets are
completely recorded.
• — Another significant control is procedures over
acquisitions and disposals, that acquisitions are
properly authorised, disposals are authorised and
proceeds accounted for.
Non-current assets
— Security arrangements over non-current assets are
sufficient.
— Non-current assets are maintained properly.
— Depreciation is reviewed every year.
— All income is collected from income-yielding
assets.
3) Audit procedures for tangible non-current assets
(1) completeness
(2) existence
Non-current assets
(3) valuation
(4) right and obligations
(5) additions
(6) self-constructed asserts
(7) disposals
(8) classification and understandablity
4. Non-current liabilities
• Non-current liabilities are usually authorised by the
board and should be well documented.
1) Auditors will primarily try and determine:
— Completeness: whether all non-current liabilities
have been disclosed
— Accuracy: whether interest payable has been
calculated correctly and included in the correct
accounting period
— Classification and understandability: whether longterm loans and interest have been correctly disclosed
in the financial statements
2) Audit plan