13 February 2002AC312 Auditing Lecture 51 AC312 AUDITING Lecture 5. Final Audit Work: Analytical Procedures, Fixed Assets and Debtors

13 February 2002 AC312 Auditing Lecture 52 Learning Outcomes By the end of the lecture you will be expected to: F Describe the nature of final audit work F Understand the role of analytical procedures in the audit process F Describe and evaluate the procedures for auditing fixed assets and debtors

13 February 2002 AC312 Auditing Lecture 53 Year end audit work - I n Bank confirmations –bank accounts –customer’s assets held n Stock count observations –existence and condition of stock –cut-off procedures

13 February 2002 AC312 Auditing Lecture 54 Year end audit work -II n Debtors and creditors circularization –direct to auditor n Letters to other professionals –lawyers –valuers –actuaries –surveyors

13 February 2002 AC312 Auditing Lecture 55 Analytical Procedures - I SAS410 defines analytical procedures as the analysis of relationships: (a) between items of financial data, or between items of financial and non-financial data, deriving from the same period; or (b) between comparable financial information deriving from different periods or different entities

13 February 2002 AC312 Auditing Lecture 56 Analytical Procedures - II The purpose of the analysis is to identify consistencies and predicted outcomes or significant fluctuations and unexpected relationships, and the results of investigations from these.

13 February 2002 AC312 Auditing Lecture 57 Types of analytical procedures ¨ graphs and trends ¨ simple ratios ¨ statistical measures, e.g regression analysis ¨ Z-scores

13 February 2002 AC312 Auditing Lecture 58 Analytical procedures can be used: 4 in planning the audit ãbased on interim financial statements and management accounts 4 as part of the substantive procedures ãe.g. relationships between selling expenses and turnover 4 as part of the overall review ãto corroborate conclusions formed during the audit

13 February 2002 AC312 Auditing Lecture 59 FIXED ASSETS -I n Existence and ownership O Authorization for acquisitions and disposals O Physical existence O Good title

13 February 2002 AC312 Auditing Lecture 510 FIXED ASSETS - II n Accuracy in financial statements N Acquisitions and disposals correctly stated N Appropriate depreciation method N Reasonable useful lives

13 February 2002 AC312 Auditing Lecture 511 FIXED ASSETS - III n Completeness in financial statements N All acquisitions and disposals recorded, in correct period N Fixed assets and depreciation properly summarised and disclosed

13 February 2002 AC312 Auditing Lecture 512 DEBTORS n Existence –amounts actually due to the company n Accuracy of amount in balance sheet –represents amounts that are collectable n Completeness –debtors properly summarised and disclosed in balance sheet

13 February 2002AC312 Auditing Lecture 513 AC312 AUDITING Lecture 5. Final Audit Work: Analytical Procedures, Fixed Assets and Debtors