pie Substantive procedures over bank balance: a —_— Bank CONFIRMATION Rawk Recon citiaTion) -Lo on litem’ “A ~~. ~ Rigttt / obligerena Maweth iy Ale ~ Ente vile D Suberachve Cora) val nohiery b a hut prouedurts all peahion Cove | v I. Corin Ail wht hawk ale + Volare, Agr +0 of SI "cash bok / Bark i concilishen 2. Details & lacn, tf ay - Princtpel amt = Rapoupmect Yor wrt tedkinp Rel 9 Agr wm SPP : Frnane at 7 Agree to ple dss dla sort — Derik oF asete note pledged aS Keuirihy , i} ony Naru toBank Reconciliation Balance per bank statement/bank confirmation reply ,« Add: Outstandinglodgment _ | ,000 (2) (4) BOC 123 $50.000 ICBC 234 $30,000 Less: | Unpresented cheques (30,000) HSBC 567 $20,000 SCB 789 $10,000 Balance per cash book (5) 0 Wf Standing (adgrneret Chea ust deposit vested om Chit bed mm 7c NN rey hd nw bork stelnent STAR Ve \ timing, diff ee to chagne clesyanca prouss fo ™ bas am "See eax —— ht) Bla. dete —7 dy Bawle | te Resewoble. Y depen Gad wee Ale ~ bowed praden’ Chey ate etekinant WOR ————————/ oes 2 Sih atau] Ds net] tromifer Gah(4) Agree outstanding lodgment (C1008 end cash book) ind fost yearend bank, statement Unpresented cheques to pe uy 7 Oath Bede Chagne POrment [6s ned samt and read ePoee 1S Suppliw depot Ai nk oe ot ATTR YIt v Agyae to pote ylé E tiling de a Bonk besbementft Se ed So Sone - Examine any old unpresented cheques to assess if they need to be written ne back into the Burchase ledger as they arelnollongerwaliditolbelpresented; Chequio oft vale fe 6 nemerks, 315.2016 = Sawt a chigue 710 oe) [ Bse lb — hegne be comet invahel Dy Rawk nw Peyetle Tun wf ald pd oe cr’) 2) (d) Describe substantive procedures the aucltor should perform to confizm tah andiwash balance of Fax Industries Covattheyeanend, (Lats) — Foxrmaintains a curent account and a number of saving (deposit) accounts, Cah Bolen te Perform, a tath count amd agrte baloncelourtid bo the LMth brok balence, Bank Relone B amie Conf? wohien Bonk revere: listen 1. Obtow Unlrenohen 1 Traut oll ontttading J Le dgrren i sf —ad! home —Afes a, Trove all unpresontad. 2. eras bolame om Chee wes ans - us beole / Bowk re ceviltetern hig iota 3. Mere lean belaile te whe wate QaS nb p is@(d) Substantive procedures over bank and cash balance of Fox Industries Co (Fox) = Obtain Fox's current bank account reconciliation and check the additions to ensure arithmetical accuracy. = For the current account, agree the balance per the bank statement to an original year-end bank statement and also to the bank confirmation lett. a Agree the reconciliation’ balance per the cash book tothe year-end cash book. coe RSReNRAMESEMA ar ao to 02 PEEK rps. For any unusual mt delays obtain explanations from management. ‘they rad tbe wen cack the purchase edge ey amo ‘or the trial balance to ensure ~~ amounts or signif @ ® completeness of bank balances. — Review the cash book and bank statements fr any unusual tems or large transfers around the yea end, as ths could be evidence of window dressing, — & or any legal right of set-off as this may require | ~ For the saving (deposit) bank accounts, review any reconciling tems on the year-end bank reconiliations and agree to supporting documentation. OM ee ee cash book - - Review the financial statements to ensure that the disclosure of cash and bank balances are complete and accurate.Procedures the auditor should adopt in respect of auditinglaccounting i include: Ex ample presen fev lage! claim - pie] a provcinn Lv ridundanny - pide prettwn fay Herventy - pis dap rsicion (atthe! te) = pi Managementrepresentation = Cov irvaten rw Naa rage tnt ae ou ny 2 utefel + Confican meget J wel neat lw Aavoprp eéti nehec Doe wid Qa pT (a) Describe the audit procedures required in respect of accounting estimates, (5 mats) 1 ASE nget hon tty eetinale Ravin the matched / Absunep tions wade by daft 3. Bude loveless a eR Reel ohComp sort rte gant itt ha Rovian pot Yt events if eng, thee frvdt tudinte On the terme of VE 1 Obtan — amllen nupet regent lise Cncfremsep thay elves tha +h ettuaptine uted are Vand reblepia Lagel clam aganin she compan prob abi! Hin Am unt probeote pasele wtf alae L e pin oks dose, bowting ort [iabilewy Ca J ndegen tnet on ON Mage Expert = lowyer + evlersal indep ondaret v move rolieble co © herve more \ subyuriva eypert Ravine’? pelt y/& overt suth ao atta! setlenont” OM pogint to tanto whether +he proviuen is crvert Jum wa 64k p27; co wit | Luster fren ee ant dena D.C nahin Powe Pine appl Lawyer — probebtiiny 3, Nirdm — repragnet ohn u. Port IE — attval pugmendFood poisoning 10 assess whether Pineapple haSBRESERMt e ult of a | btair/TSIAVEWESTONETSTOBABIMIY the claim being successful. — "Review board minutes to understand whether the directors believe thatthe claim will be successful or no. CBee st yearend pe ot ais er ay payment have ben mae ay ofthe amar I" iscuss with management as to whether they propose to include a contingent liability disclosure or not, consider the reasonableness ofthis. oe 1 and hence no provision is required. Review the adequacy of any disclosures made in the financial statements. ~ 21h Sept Specimen Gran 8 Food poisoning — Balotells directors received correspondence in November 20X4 from a group of customers who attended a wedding at one of the company's hotels. They have alleged that they suffered severe food poisoning from food eaten at the hotel and are claiming substantial damages. Management has stated that based on discussions with their lawyers, the claim is unlikely to be successful. 8 In relation to the claim regarding the alleged food poisoning, which of the following audit procedures would provide the auditor with the(MOST veiable audit evidence regarding the likelyouteomef the litigation? ‘A’ Request a written_representation from management supporting their assertion that the claim will not be successful et siginett Send an enquiry letter to the lawyers of Balotelli to obtain their view as to the probability of the claim being successful eylrne! / Tint odds [tvpert C Review the correspondence from the customers claiming food poisoning to assess whether Balotelli has a present —__ obligation as a result of a past event = Lan Swit oy ite oa D Review board minutes to understand why the Girectors bglieve that the claim will not be successful get ett mateSubstantive procedures to verify redundancy provision | IAS 37 n Qd per It oo, Announ tive y penne pox adten lt a Qnn ound AMER yle => No pewsien Re€alculate the redundancy provision to confirm completeness and agree —— components of the calculation to SUpporting documentation) — es cwplenwont avlvau ay. calle crive aby am eet wah thie eQ: Mati 7eobon, letter Dac 2 Old pil (() Chuck Industries has decided to outsource its sales ledger department and as a result it is making 14 employees redundant A redundancy provision, which is material, willbe included in the draft accounts. a Required: Describe substantive procedures you should perform to confirm the redundancy provision at the yearend. = Ls Devise wants yy. Stald bend (mais)2. Ohtem a se % resturant sspleyses And rlutY radunalenig pergment, Cot? te Wdvre — Cop Wlntis ond ae any, 3. Ravine Seoppeting do mint tal oe tap lerprent Cavour or cotleerve Ogrumet on thn ridundang poymont ond eect inlets the prtion y Revins pate ole aeteal pogmant To assess hetley previiies ts covert, Dec roi2 Bub p34 ii) Reorganisation The company recenty @nnolnoed plans toreorgarise its health and fitness clubs. Ths wil involve(@osing > ia rn — plans were agreed at a Ls met and Rose is proposing to make: he financial statements. J (4 matks) Coamt yaroguie =o provi Ly teinrog Record — framing ovpunte hen trearred {rT YU Obdein a prukdown > pretntnp vi at Treladad en cle prim@® Wier fo slewlel Aor — ennrunced hefeve ie DN et naet tap legens, Last © Peco mls vesandanuy preitinr (ii) » poet ye pagent Reorganisation Review the board minutes where the decision to reorganise the business was taken, ascertain if this decision was made pre year end, it er, to confit was announced beforethe yearend. Se. Confirm that only crect expenditure fom restructuring is included. DP ev chade treining Sateen stn omen wee 5 7 For the costs included within the provision, agregaisuppomting documentation to confirm validity of tems included. Obtain a written répfesentationsiconfirming management discussions in relation to the announcement of the reorganisation. a Review the adequacy of the disclosures of the reorganisation in the financial statements to ensure they are in accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets.MCO Test 2 Gs B is) A mH »v OB Mm) ¢ ca) A (ey Cc cB Cs) 8B Cie) dD4 Substantive procedures to verify warranty provision _ 0) No. 4 valid warranty — Cowtract (D Extinate hgh cles ® CH ine reper ey Ww rep lotement- fort (D » @ x ® 2 Hawarty pamcon Ast vit Dv Bepmte WV Newer precios ' Abin yi 7 attual — chane De barren, pris av lnvewteny Dac wir hsb Ci?) pTThe waranty provision included within the statement of financial poston is mata. The audit team has performed {estingroverthercalculations and asSUifiptions which are consistent with prior years. The team has requested a writ alwritten representation from management confirming the basis and amount of the provision are reasonable. Management has yet to confirm acceptance ofthis representation. 3 Maks (ii) Describe the auditor should now perform in order to reach a conclusion on the balance to be Included in the financial statements. (6 marks) Note: The total marks will be splityequaliysbetweenveachissue. S wb $f antive, preudures procedures addtens.| to he perpevmad alrendis = pro udurte L performed. pis L @ Moyet abit oo test col wlehove CH mall PAVED ASpaagtont — law yy pron © Compan. prndven to otf val Clini durty the Ye ® Pow VIC artee! farm(li) In order to reach a conclusion on the balance the following procedures should be performed: - — Review the rlistivearendeperiocsinenmnareaivSleielGrRlainieeally male against HAENAMOHMIs provided ~ Review the levelfofprlonyeanprovsionswith the arioUsilained to assess the reasonableness ofmanagements) fore ~ Review board iminUt@SifOlassess whether any changes are required to the level of the provision as a result of an — increased or decreased level of claims by customers. -pr‘te cReo CREA * Completeness All PPE are recorded; no recorded PPE + Right and obligation a All PPE belong to the company a + Existence All recorded PPE exist at year end + Valyafion Kecnraw, yalnshen and all oLober a All PPE are recorded at appropriate carrying amount, including adjustment for depreciation, valuation and impairment allowance a7 Rested, valnohen ond all ocachen _ (1) Valuation of property, plant and equipment (PPE): / Y "a ¢ . bo + y hin R : [wpote nent = Review depreciation policies for reasonableness by comparison to: a . a «industry practices, ae «the entity’s replacement policy and — Kietd! mage the profits/losses arising on disposal of assets. huge prof ~> cond be Leprumated te Sou > wrefol Ade tdrnste is de> SHORT huge lets 7 Canld he diprecstad tor Slowly ~7 utefel te eitnate Te fem Long.(Depreciation - Substantive analytical procedures ~Sproof=in=total - pao a prodflinitotal colculet tion, considering the timing Is and compare this éxpeetation to the aetwallHarge, and investigate any signifi¢antidifferences. Vote 9 a clals of PPE ab began of (eg, meaahuiely pens + new PPE ower 5 Us mp pre Aapaseels -O© 6+ ™H# = tete] eating od hap. cherge, leva we to reundid oops charge Sun wiz Bb prt Depreciation Pineapple incurted significant capital expenditure during the year on updating the leisure facilities for the hotel The finance director has proposed thatthe new leisure equipment should be deprecated over 10 years using the straigtine method. be Cengpere -Thk afd Afe me indachy a- Reviane rhe w loss ow dupe se 1(etsure WAbiphit “Ww eased he Faptewablaness Mp sme ae 8 Stet songlts Op Liga petpmnmr dd rhea lel, keprenshor Cherge: u. Peefvnn a preth- tne tore! oul door therge fw wiser OAripmirl aud urepere to yeev ded oben Charge and Preto Segnil icone diff ovowcesDepreciation ~ Review the reasonableness of the depreciation rates aapied to the new leisure facilities and compare to industry averages. — Review the capital expenditure budgets for the next few years to assess whether there are any plans to replace any of ‘the new leisure equipment, as this would indicate that the useful life is less than 10 years. Review profits and losses on disposal of assets disposed of in the ysar, to assess the reasonableness of the depreciation ‘polices. oO ea: (@ealculatetietdepreciation;chargeto ensure that the non-current asset register | Is — PetfompanproofifitotalvcaloulationsfonthendepreciationychargedsonineNequipmient, discuss with management if eeeeoee foo the disclosure ofthe depreciation charges and policies in the draft financial statements.| [= (Reliancejonjexpert > assess the reasonableness of thelwaluer: | O)veliftushenn independence Wotk wow t= valig, Stnciev as, scope of work and ——~—~=p pepe assumptions used. 1 anu chante > Omsider loution [sree /condutersphysi! poset Ala verorol = Nowe current Asced Ragicter Comp lstoness 1+ evicts Steet Ts te me coveted. | ‘oes tk Exton, lf it vecerdad - Review the repairs and maintenance expense account in the statement of comprehensive income for items of a capital nature, i.e. to identify whether any asset replacements have been wrongly expensed off. Tt not PPE are rently resordad oo veppaty hep nse In ple, than Ppt ts incomp ty amd ts Under Ht atod. Tum pet MCRAE PTS 6 Which of the following substantive procedures provides evidence over the”COMPLETENESS of non-current assets? A. Select a sample of assets included in the en anes them at the client premises EY Mamta Bo Review the repairs and maintenance expense account to identify any items of a capital nature C For assets disposed of, agree the sale proceeds to supporting documentation and cash book (1 matk) Sep rib S pesimen Sram QT7 The audit assistant who has been assigned to help you with the audit work on non-current assets has expressed some uncertainty over why certain audit procedures are carried out and specifically is unsure what procedures relate to the valuation and allocation assertion. Keeuraty, yalushen, ailrution Which of the following audit procedures are appropriate to test thé|VALUATION assertion for non-current assets? (1) Ensure disposals are correctly accounted for an jrvloss on disposal (2eRecalculateYye depreciation charge for a sample of assets ensuring that it is being applied consistently and in ECTTEIE will IAG 16 Property, Plant ond Equipnneit Je Review the repairs and maintenance expense accounts for evidence of items ofa capital nature sp Srvple Herat (4) Review board minutes for evidence of disposals during the year and verify that these are appropriately reflected in the non-current assets register A land2 Cee Deen Bee rel REbGY pTL (b) Describe the Slibstamive procedures the auditor should perform to obtain sufficient and appropriate audit evidence in relation to: () The falaton of land afi bles and the recent ured warehouse; and ‘(6 marks) NeW nethoue — lt Lot — — trhew [wrote 2. Aten — Phegcice! tai porters RB Rsk title dee U Reem nig) wdasharn , all ocatin T Reale he denn chee fv he MN Weveloute to snawe tb hee 4 seemeths' dap 2, Revalwohnr ¢ Agren — Yiveluad amt to valuahen vopot 6. Rete} — revalneton Gain ov [oesBuy fall Substantive Procedures - PPE - Additions and Disposal Twn wiz ei h pm ~~ (b)_ Describe substantive procedures you should perform at the year end to confirm each of the following for plant = and equipment: Invole 2 it —7 Geweun, valulien ,allteher i) Ations; and 2 Trek + wenthp + ughts / obligehon A Disposals. Agree Sole precuds to (maris) Sundin Celie [nverte, veel wlols pepe ov Bis om on pore Dac rR QI d Cit) pee ~——G) Metre te $5 in exe ned on inpoing hay prodcion pes, ropa hen pre i Sele Soule Select Sauple =? Tavore ~7 = Inverte \ bu fou inves DP v Taye / pl lt \' \y o blyeten C¥l ance Not class et ark fee pi