In: Accounting
In regards to Sooty Ltd: Two key account balances at risk of material misstatement. For each account balance, the key assertion at risk. A justification as to why the account balances and assertions are at risk. An outline of one (1) substantive test of detail that Tyrone could undertake for each account to address the assertion and risk identified.
In relation to Hales Ltd:
Substantive audit procedures using CAATs
Use CAATs to
1. INITIAL PROCEDURE
a. Obtain an electronic version of listing and import to audit software
b. Scan listing for unusual amounts
c. Stratify accounts by categories
d. Using CAATs cast scheduleof account for mathematical accuracy
2. CAATs can be used to confirm whether any inventory adjustments noted during verification have been processed correctly into final inventory records.
3.CAATs enable audit team to test large volume of inventory data more quickly and accurately.
4. Audit team can use CAAT software to calculate inventory days
for the year-to-date to compare against the prior year
to identify whether inventory is turning over slower, as this may
be an indication that it is overvalued.
5.Audit software can be utilised to produce an aged inventory
analysis to identify any slow moving goods, which may require write
down or an allowance.
6.Cast the inventory listing to confirm the completeness and
accuracy of inventory.
7.Audit software can be used to select a representative sample of
items for testing to confirm net realisable value and/or
cost.
8.Audit software can be utilised to recalculate cost and net
realisable value for a sample of inventory.
9.CAATs can be used to verify cut-off by testing whether the dates
of the last GRNs and GDNs recorded relate to pre year
end; and that any have been excluded from the inventory
records.
10.CAATs can be used to confirm whether any inventory adjustments
noted during the count have been correctly updated into final
inventory records.