Auditing Miscellaneous Expenses

Audit Testing 1
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Audit Testing 2
Audit Planning
An Audit plan is considered to be specific guidelines to be followed when performing an
audit. It helps the auditor in obtaining sufficient appropriate evidence for the situations, helps
keep the cost of auditing at a reasonable level and also helps the auditor in avoiding
misunderstandings with the client1. Audit planning is usually an important area in auditing
that is basically performed at the beginning of the audit in order to ensure that sustainable
attention is devoted to particular areas and potential issues are quickly identified. Before audit
testing, the auditor usually plans to carry out an audit an effective and timely manner through
designing detailed procedures in order to obtain sufficient appropriate audit evidence. This
particular assignment entails planning of an audit for Fuchsia Enterprises after checking its
preliminary Trial Balance2. This assignment also extracts information from the enterprises
trial balance and identifies the accounts that are likely to require substantial attention, provide
analytical procedures for each of the item and the possible recommendation for the audit
procedure to be used in the auditing. According to Fuchsia Enterprises trial balance, the
selected seven accounts for audit that require attention are;
Items accounts 2016 – 2017 2015 – 2016 % Change
1 Interest income 48 50 4%
2 Bank Loan 181,525 187,450 3.16%
3 Miscellaneous 1,440 0 1,440%
4 Accumulated depreciation machinery 36,475 24,000 52%
5 Accounts receivables 131,820 103,585 27.26%
6 Depreciation 35,545 15,738 125.9%
7 Wages 62,570 53,000 23.72%
1 Arens, Alvin A., Randal J. Elder, and Beasley Mark. Auditing and assurance services: an integrated approach. Boston:
Prentice Hall, 2012.
2 Bergquist, Sophia, and Sandra Elofsson. "The collaboration between auditors and IT-auditors: The effects on the audit
profession." (2016).

Audit Testing 3
Analytical review
Generally, use of analytical reviews is considered to be one of the procedures for increasing
the auditor’s efficiency3. Analytical procedures usually consist of an assessment of financial
data prepared by the auditors of and the expected relationship between nonfinancial and
financial data.
Interest income
Interest income is one of the areas in the enterprise trial balance that basically requires
significant attention. The company revenues may be at risks. Interest income area requires
great attention because it is more at risks by the misappropriation by the company
management4. The interest income is usually am accessible funds by the management and
thus making it more vulnerable to misuse. According to Fuchsia Enterprise's trial balance, the
amount of interest income as at FY2015-2016 was A$50,000 and A$48,000 at FY2016-2017.
According to the trial balance analysis, there is an indication that there is a 20% decrease in
the amount recorded as interest income5. The decrease in the amount received should be
scrutinized thoroughly to determine if there is any possibility of the fund's misuse by the
management. The difference in the two amounts should be recalculated so as to check if
proper evaluations were conducted so as to enhance its materiality. Basing on the riskiness of
this item, I recommend that the auditors must recalculate interest income on note receivables
to determine if proper formulas were used.
Sales
Sales is another item that basically requires special attention when planning for the audit.
This is because the item is vulnerable to greater risks when the company is carrying out its
business. According to the company, the business usually sells its products either in cash or
3 Arens, Alvin A., Randal J. Elder, Mark S. Beasley, and Chris E. Hogan. Auditing and assurance services. Pearson, 2016.
4 Vona, Leonard W. Fraud risk assessment: building a fraud audit program. John Wiley & Sons, 2012.
5 Rahim, Siti Rohaya Mat, Fauziah Mahat, Annuar Md Nassir, and Mohamed Hisham Dato Hj Yahya. "Re-thinking: Risk
Governance?." Procedia Economics and Finance 31 (2015): 689-698.