AUE3761 - ASSIGNMENT 3

AUE3761

, QUESTIONS:
REQUIRED

1. With reference to the background information:

Describe the substantive audit procedures that you would conduct to obtain audit evidence in respect of:

- the occurrence assertion for additions and disposals of mini trucks. (9 Marks)
- the accuracy, valuation and allocation assertion relating to the accumulated depreciation of mini trucks. (11
Marks)

Communication skills – logical argument and appropriate style (2 Marks)


2. With reference to the background information and inventory:

Describe the substantive audit procedures to test the rights and accuracy, valuation and allocation assertions of
inventory in transit from the foreign supplier. (18 Marks)

Communication skills – appropriate style (2 Marks)


3. With reference to the background information and inventory: (29 Marks)

a) For each account balance listed,
b) list the inherent risk factors and explain (describe with relevant reasoning) why that inherent risk factor is
applicable or not applicable to the account balance.
c) assess where the account balance belongs on the spectrum of inherent risk (higher, middle or lower end).


4. With reference to Payroll:

Criticise the prior year (2020) payroll expense workpaper and the procedures performed in it. Provide
recommendations to improve it. (24 Marks)

Communication skills – appropriate style (1 Mark)


5. With reference to the background information:

Briefly describe the ethical and King Code IV concerns your audit firm would have to take into account regarding
the gift offered to you and the audit partner. (4 Marks)




1.

, 1. Substantive audit procedures to obtain audit evidence in respect of the occurrence assertion for additions and
disposal of mini trucks:

Additions



- Select a sample of additions of mini trucks from the fixed asset register and trace them to capital budget, minutes
of directors’ meetings and purchase requisitions for evidence of authority for the acquisition of the mini trucks;
- Inspect mini trucks acquired during the year and cross-reference description, serial number, etc., to purchase
invoices, receipts obtained from suppliers or purchase contracts;
- Inspect the asset register and purchase documentation and verify that the registration numbers of additions are
not the same as the ones for mini trucks which were already available prior to current year;
- Inspect the purchase invoice or purchase contract to confirm that it they are made out to Living Well (Pty) Ltd and
is for the selected mini trucks and is signed; and
- Inspect payment records to confirm that payment was made for the mini trucks.

Disposals

- Inspect the disposal documentation, such as directors` meeting minutes used to approve the disposal for an
authorising signature;
- Trace the disposal by reference to the capital budget, confirm authorisation for the disposal of the mini trucks;

- Trace the proceeds of the sale to the receipts` records or bank stamped deposit slip or bank statement;
- Inspect the receipts and contracts of sell and confirm that they were generated by Living Well (Pty) Ltd;
- Inspect the asset register and verify if the disposed assets were disposed in the asset register and inspect a
sample of mini trucks and verify that they were not recorded as disposed.




2.