Section B: Completion, Review, Reporting
Final Analytical Procedures at Completion Point
Inventory
- Stock count
- Reconciliation of stock count to year end inventory report
- Inventory referenced to purchase invoices
- Need to conclude on completeness, existence and accuracy of valuation
- Discuss with management how figure for obsolete inventory is calculated
- Assess valuation of slow selling inventory
Trade Receivables
- Can’t place reliance on confirmation from customers; should perform after date cash testing
to ensure payment was received
- Write off amounts owed by customers that have entered liquidation and assess inventory
that relates to them
Right of Use Asset
- Copy of sale and leaseback agreement
- Agreement of sale proceeds to bank statement
- Review of board minutes
- Working papers for calculation of PV of lease payments
- Agreement of carrying amount of asset to NCA register
Asset Impairment
- Assessment of whether appropriate discount factor used for calculating value in use
- Recoverable amount higher of fair value less costs to sell or value in use
- Impairment reversal capped at carrying amount had no impairment loss been recognised in
prior years
- External confirmation of NRV by qualified independent expert
- Physical inspection of asset to confirm condition and reasonableness of depreciation policy
- Agreement of opening balance to NCA register to confirm correct amount been b/f in
working papers
Audit Evidence for Cashflow
- Agreeing opening cash position to cash book and bank reconciliation
- Reperformance of client’s calculations in preparing forecast
- Review meetings notes to assess key assumptions made
- Evaluate previous profits and other financial forecasts
- Comparison of cashflow forecasts with management accounts for same period to assess
accuracy
- Review of correspondence with lawyers
- Review of communications with bankers and lenders, loan facilities
- Review of board minutes
, Uncertainties in relation to going concern
Tenders
- Success rate of tender that is due in foreseeable future (next twelve months)
o Financial impact on going concern if unsuccessful
Going Concern
- Review of press reports
- Review of correspondence files relating to new contracts relating to finance/revenue
- Contingency plan notes from board meetings
- Review and analysis of budgets and cashflow forecasts
- Copies of bank facilities to assess feasibility of maintaining agreements without defaulting,
penalties
Going Concern Indicators
- Revenue and Profitability
o Decline in net profit and operating profit margin
o Sustainability of rapid revenue growth
o Discounted selling prices to boost revenue
- Liquidity and Working Capital
o Increase in gearing
o Fall in interest cover
o Overdraft agreement with bank
▪ Additional penalties
o Increasing finance costs
▪ High credit risk to potential lenders
o NCA decrease
▪ Difficulty replacing/renewing existing capital expenditure levels
- Legal Claims
o Demand on cashflow
o Further deterioration
- Cashflow Forecast
o Securing finance
o Realistic assumptions
Reporting
Title
Addressee
Auditor’s opinion
Basis for opinion
- If disclosures not sufficient or adequate elaborate
Conclusions relating to going concern/Material uncertainty relating to going concern
Listed entities
- Key audit matters
- Application of materiality
- Overview of the scope of audit
Final Analytical Procedures at Completion Point
Inventory
- Stock count
- Reconciliation of stock count to year end inventory report
- Inventory referenced to purchase invoices
- Need to conclude on completeness, existence and accuracy of valuation
- Discuss with management how figure for obsolete inventory is calculated
- Assess valuation of slow selling inventory
Trade Receivables
- Can’t place reliance on confirmation from customers; should perform after date cash testing
to ensure payment was received
- Write off amounts owed by customers that have entered liquidation and assess inventory
that relates to them
Right of Use Asset
- Copy of sale and leaseback agreement
- Agreement of sale proceeds to bank statement
- Review of board minutes
- Working papers for calculation of PV of lease payments
- Agreement of carrying amount of asset to NCA register
Asset Impairment
- Assessment of whether appropriate discount factor used for calculating value in use
- Recoverable amount higher of fair value less costs to sell or value in use
- Impairment reversal capped at carrying amount had no impairment loss been recognised in
prior years
- External confirmation of NRV by qualified independent expert
- Physical inspection of asset to confirm condition and reasonableness of depreciation policy
- Agreement of opening balance to NCA register to confirm correct amount been b/f in
working papers
Audit Evidence for Cashflow
- Agreeing opening cash position to cash book and bank reconciliation
- Reperformance of client’s calculations in preparing forecast
- Review meetings notes to assess key assumptions made
- Evaluate previous profits and other financial forecasts
- Comparison of cashflow forecasts with management accounts for same period to assess
accuracy
- Review of correspondence with lawyers
- Review of communications with bankers and lenders, loan facilities
- Review of board minutes
, Uncertainties in relation to going concern
Tenders
- Success rate of tender that is due in foreseeable future (next twelve months)
o Financial impact on going concern if unsuccessful
Going Concern
- Review of press reports
- Review of correspondence files relating to new contracts relating to finance/revenue
- Contingency plan notes from board meetings
- Review and analysis of budgets and cashflow forecasts
- Copies of bank facilities to assess feasibility of maintaining agreements without defaulting,
penalties
Going Concern Indicators
- Revenue and Profitability
o Decline in net profit and operating profit margin
o Sustainability of rapid revenue growth
o Discounted selling prices to boost revenue
- Liquidity and Working Capital
o Increase in gearing
o Fall in interest cover
o Overdraft agreement with bank
▪ Additional penalties
o Increasing finance costs
▪ High credit risk to potential lenders
o NCA decrease
▪ Difficulty replacing/renewing existing capital expenditure levels
- Legal Claims
o Demand on cashflow
o Further deterioration
- Cashflow Forecast
o Securing finance
o Realistic assumptions
Reporting
Title
Addressee
Auditor’s opinion
Basis for opinion
- If disclosures not sufficient or adequate elaborate
Conclusions relating to going concern/Material uncertainty relating to going concern
Listed entities
- Key audit matters
- Application of materiality
- Overview of the scope of audit
