Audit Procedures Summary Notes

AUDIT PROCEDURES
CONTENT:
1. Investment & Finance
2. Inventory Cycle
3. Property, Plant & Equipment
4. Computer Auditing
5. Materiality
6. Internal controls
7. Human Resources and Payroll Cycle
8. Expenditure Cycle
9. Bank and Cash
10. Revenue Cycle
11. Provision for Bad Debts

, 1. Investment & Finance
Investment in Shares
Initial procedures

 Obtain a schedule of balances
 Cast and cross cast for mathematical accuracy
 Scan the schedule for unusual amounts or descriptions
 Agree opening the balance to prior year's working papers (closing balance)
 Agree the closing balance to trial balance, general ledger and AFS.


Obtain a management representation letter


Analytical procedures

 Compare balances month-on-month and follow up on discrepancies
 Compare amounts at and beginning and end of financial year and follow up


General procedures

 Inspect directors' minutes of meetings to ensure investments properly
authorised
 Obtain policy valuing for investments
 Ensure policy being is applied consistently
 For investments bought or sold in current year, trace payment or
receipt to bank statement,
 Inspect relevant documentation's date
- Strate documentation
- Shareholders' register
- Purchase or sale agreement.

,Existence

 Send a confirmation letter to Strate confirming or shareholding at year
end for listed shares
 Inquire of management or determine from Strate if any shares are
pledged and inspect loan agreements


Accuracy

 Inspect financial statement to ensure amount/ value of shares
per IFR59 and specify method
 If acquired or investment in prior years, confirm opening
balance to prior year working papers.
 Any investment sold or acquired in current year, confirm price
or cost by inspecting purchase or sale agreement.
 Investments sold in current year - inspect journal entries for
correct derecognition as per IFRS 9


Valuation

 Listed shares - obtain share prices at year end JSE listings.
 Unlisted shares - obtain directors/ expert valuation (expert
procedures if used)
 Recalculate any gains and losses on investments and trace
through to SOCI


Dividends Received from Investing (must give procedures for dividend received if asked
for all procedures over investing)

 Vouch dividend declared FS of a valid media announcement
 Recalculate dividend receive of number of shares owned x dividend per share
 Inspect bank statement to ensure dividend was received
- Trace amount to general ledger to ensure accounted for correctly

,  Inspect whether shares purchased are cum. dividend or ex. dividend from
purchase agreement.
- Ensure treatment is correct




Loans taken out

 Specific analytics
 Compare prior year, budgeted and industry norms to actuals
- debt: equity
- debt total: assets
- interest expense: debt
 Inspect loan agreement, for name of borrower, amount, interest rate,
payment terms, signatories and security
 review minutes of meetings with directors to ensure loan properly
authorised.
 review memorandum of incorporation and ensure there are no restrictions
on company taking out a loan and special terms are complied with
 inspect financial statement to ensure that disclosure is correct
- correct split - between current and non-current liabilities
 Confirm loan with the bank, name of borrower and amount outstanding at
year end.


Interest paid

 Recalculate interest as per loan agreement terms.
 Inspect bank statement to ensure payment.
 Trace payment to journal entries to ensure correct records.
 Inspect SOCI to ensure interest has been disclosed and expensed correctly