1 UNIVERSITY OF ZULULAND RESTRUCTURED FOR RELEVANCE Accountancy @Unizulu FACULTY OF COMMERCE, ADMINISTRATION AND LAW DEPARTMENT OF ACCOUNTING AND AUDITING AUDITING 3B CADD 302 CAUD 302 NOVEMBER RE-EXAMINATION 2017 SUGGESTED SOLUTION 1
2 60 MARKS Question 1 1. With reference to working papers F1.1 and F2.2: Describe the additional substantive audit procedures that Hlengi will need to perform in order to satisfy herself that the AHL purchases transactions and year end accounts payable balance are fairly stated in the annual financial statements for the year ended 31 October 2017. M GENERAL PROCEDURES 1. Consider the adequacy of the design and implementation of systems of internal control to record valid, accurate and complete purchases and accounts payables. 1 2. Consider testing controls if designed and implemented throughout FY2017. The results of such controls will have an impact on the substantive procedures to be performed. 1 3. Agree the total(s) per the purchases listing to the general ledger and trial balance. 1 4. Perform the following analytical procedures relating to purchases: 1 · Comparison of purchases month on month to the prior period. .5 · Calculation of purchases as a percentage of gross profit or total expenses and comparison to the prior period .5 .5 · Comparison of reported purchases to budgeted expenses .5 · Any other valid analytical examples for purchases · Maximum for analytical procedures on purchases ONLY including examples = 2 marks 5. Inspect the financial statements of AHL and confirm that the purchases expenditure is adequately presented and disclosed in line with IFRS and the adopted accounting policy. 1 PROCEDURES - PURCHASES TRANSACTIONS Occurrence 1. For the sample selected - Obtain and inspect the supporting documentation (the purchase order, goods received note, supplier delivery note and supplier invoice) and confirm that: 1 . the supporting documents from suppliers is made out to AHL. 1 . goods are of a type used by AHL (i.e. cleaning materials or chemicals). 1 . all the documents are cross-referenced to one another and the information is 1 consistent from one to another. Direction of testing is from the accounting records to the supporting documents. 1 . each document is signed by adequately designated authority (e.g. DN signed by the MDC buying officer). 2. To further corroborate the occurrence of the purchase, inspect bank statement/cash payment records to confirm that the goods were paid for. 1 Accuracy For the sample selected: . Confirm mathematical accuracy by recalculating all extensions, casts, discounts and VAT calculations 1 1 . If VAT has been claimed, inspect the invoice against the valid tax invoice guide of SARS to confirm it is adequate (e.g. confirm that the VAT number and supplier details, supplier's VAT number are clearly presented on the tax invoice). 1 . Using the supplier name or VAT number, verify registration as a VAT vendor on the SARS website. 1 . Agree the prices used on the supplier invoice to the purchase order and the authorised/negotiated price list. 1 . Agree the quantity and description of