Audit and Assurance: Substantive Procedures, Control Recommendations, and Audit Risk

Audit and Assurance

TABLE OF CONTENTS
Q1...............................................................................................................................................3
a..............................................................................................................................................3
b..............................................................................................................................................3
c..............................................................................................................................................4
Q2...............................................................................................................................................4
a..............................................................................................................................................4
b..............................................................................................................................................5
Q3...............................................................................................................................................5
a..............................................................................................................................................5
b..............................................................................................................................................6
c..............................................................................................................................................7

Q1
a.
Five substantive procedures which auditors of Jack Co should perform in relation to the
machinery additions and disposals in order to obtain sufficient and appropriate audit evidence
are given below:
 Obtaining the breakdown of additions, derive the list and along with it agree to the
non-current asset register in order to confirm the completeness of the machinery.
 Select the sample of the additions made and match it with the agreed cost to supplier
invoice with the objective to confirm valuation.
 Review the board minutes to ensure that significant capital expenditure purchases
have been authorised by the board.
 Obtain a breakdown of disposals, cast the list and agree all assets removed from the
non-current asset register to confirm existence.
 Recalculate the profit/loss on disposal and agree to the income statement.
b.
Five substantive procedures which auditors of Charlie Co. should conducted for obtaining the
sufficient and appropriate audit evidence pertaining to the inventory of Charlie Co. are
described below.
 Obtaining the schedule for the raw materials, finished goods and the WIP inventory
and then cast to make a confirmation about the completeness and accuracy of the
balance and agree to trial balance and financial statements.
 Review aged inventory reports and identify any slow moving goods and also having a
discussion with the management why these items have not been written down or if an
allowance is required.
 In respect to quality issue in the products manufactured, discuss the same with the
management about their plans of disposing this off and reason they believe that the
goods are having the cost of $900,000. It should be supported with proper
documentation with breakdown of raw material cost, labour cost and any overheads
attributed to the cost.
 Confirm that the final adjustment for the goods is $200,000 and discuss with
management if this adjustment has been made; if so, follow through the write down to
confirm.