Help with Auditing Please

katytkatyt New MemberPosts: 9Registered
Hi Everyone :001_smile:
I am new to this site but it looks like lots of people have manage to get help so i was hoping that someone could help me with a few Auditing questions that i am struggling to find answers for. so here goes any help would be much Appreciated:-
1. Where would you draw a sample from for:-
a) Transaction Test for Sales when testing for understatements
b) Transaction Test for Purchases when testing for overstatements.

2. Why consideration should be given to the following when confirming accuracy of stock valuation:
• Selling Price –
• Details of Last goods in and out before stock count –
• Price Increase –
• Obsolete stock –

3. Test Control and Substantive Test for the following Objectives
• Confirm Recoverability of Debtors
• Confirm Completeness of Sales
• Confirm Accuracy of Debtors
• Confirm Completeness of creditors
• Confirm the accuracy of the quantities of stock & work in progress

Please help i seem to have come to a dead end :crying:

Comments

  • peugeotpeugeot Experienced Mentor Posts: 624Registered
    Hi,

    I don't want to create a thread which gives you the answers because I'm not sure if this is a live assessment you are doing but pointing you in the right direction might help you arrive at the right answer.

    Drawing your samples
    Think about why you are testing sales for understatement/purchases for overstatement - i.e. income completeness, checks to make sure assets are not overstated and checks to make sure liabilities are not understated. Think about how sales are initially generated and the paperwork that you can verify to ensure quantities and prices are correct from both sales and purchases and where those samples are drawn from.

    Stock valuation
    Think about the rules under SSAP 9. How does the selling price of goods link into SSAP 9? Stock is an asset, assets are tested for overstatement and their associated liabilities are tested for understatement - what do 'cut offs' tell the auditor?

    Tests of control/substantive tests
    Tests of control = testing the internal controls of the entity to see how effective they are. Substantive testing = the detailed testing on transactions and balances i.e. tracing purcahse orders to invoices, invoices through the ledgers and to their ultimate destination in the financial statements.

    Think about how you would confirm the above 5 points in your thread by reference to tests of controls and substantive testing. Think about what would happen if debtors contained a bad debt that hadn't been written off.

    Also, have a look at:

    http://www.accountancystudents.co.uk/cms/news/read/an_overview_of_auditing/

    and

    http://www.accountancystudents.co.uk/cms/news/read/auditing_questions_answered/

    The second article I wrote gives a description of tests of controls and substantive testing which may help you.

    Kind regards
    Steve
  • katytkatyt New Member Posts: 9Registered
    Thanx for that just what i needed. i thought i new what the answers should be just need to double chekck i was on the right path. and looking at what you have sent it looks like so far so right. thanx for that. :001_smile:
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