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(a) Distinguish between vouching and verification
Vouching
Vouching is checking the authenticity of recorded transactions. It is proving that the transactions
occurred, they are complete correctly measured and-they relate to the correct period if they are of
a revenue or expense nature.
Is defined as an independent detailed examination of the source documentary evidence purposely
to establish whether these transactions (in source documents) have been properly authorized by
rightful authority, vouchers have been properly recorded in the books of accounts, vouchers are
in the names of the client business dates in vouchers do agree with current financial period of the
client and the amount included in the vouchers do agree in both words and figures
Verification:
Verification is proving the authenticity of a recorded balance. This is achieved through
attempting to prove the assertions made by management in preparing financial statements.
ISA 500 Para 12 "when obtaining audit evidence from substantive procedures, the auditor should
consider the sufficiency and appropriateness of audit evidence from such procedures together
with any evidence from tests of control to support financial statement assertions"
The auditor must substantiate all the relevant management assertions for each outstanding
account balance. He Must obtain evidence that the accounts give a true and fair view.
(b) Audit procedures you would carry out to verify the following items appearing in the
financial statements of a client
(i) Cash in hand
• Obtain analysis of cash balances and reconcile them to the general ledger. The primary
objective is to ascertain clerical accuracy.
• To select standard confirmation forms to financial institutions to verify amounts on
deposits.
• Obtain or prepare reconciliation of bank accounts as at the balance sheet date and
consider the need to reconcile bank activity for additional months
• Obtain a cut off bank statement containing transactions of at least seven business days
subsequent to balance sheet date
• Count and list the cash in hand.
• Verify the client cut off of cash receipts and cash disbursements
• Analyze bank transfer for last week of audit year and first week o [the following year.
(ii) Loan to employee
• Obtain an aged trial balance of loan account and analysis or other account receivables and
reconcile the ledgers.
• Obtain analysis of accounts receivable.
• Inspect notes on loans in hand and confirm those with holders.
• Confirm the loan with employee. The primary objective is existence, occurrence, rights
and valuation.
• Review the year end cut off of loan transactions. The primary objective is completeness_
• Perform analytical procedure for loans, notes receivables and revenues.
• Review significant year end loans, contracts for unusual terms.
• Verify interest earned on notes and accrued interest on loans..
(iii) For insurance premium on the factory building:
• Obtain the insurance policy to assess the total premiums payable for the cover taken. This
enables to assess valuation.
• For the premiums paid to the insurer check the receipts obtained which should be in the
company's name (completeness)
• Obtain the direct confirmation from the insurance company on premiums outstanding for
the period. Is to assess the cut offs of premiums.
• Check the entries in the insurance premium account and the cash hook or bank statement
for completeness.
• Chock on the prepaid premiums which should be deferred to the next period.
(iv) Sales commission paid to an agent
• Obtain the agreement reached between the company and an agent to establish the basis
upon which the commission is payable.
• Obtain direct confirmation from the agent on the commission outstanding. This is to
determine the cutoff of balances.
• Check the entries for the commission paid in the cash book and commission payable
account for completeness.
• Checks the basis of commission paid and relates it to the benefits obtained by the
company for the reasonableness.
Kavungya answered the question on May 15, 2019 at 07:52
- a) During the audit of cash in bank, an auditor should seek to obtain standard bank
confirmations from each-hank with which the client conducted business during...(Solved)
a) During the audit of cash in bank, an auditor should seek to obtain standard bank
confirmations from each-hank with which the client conducted business during the period
under audit.
Required;
i) Explain the importance of an auditor obtaining confirmations from the client's bank.
ii) Outline the steps followed by an auditor when obtaining confirmations from the
client's bank.
b) Describe the audit procedures an auditor would carry out when verifying a client's bank
reconciliation.
Date posted: May 14, 2019. Answers (1)
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presentation and disclosure in sufficient detail in order to form a basis...(Solved)
"An auditor i:., required to use assertions for classes of transactions, account balances and
presentation and disclosure in sufficient detail in order to form a basis for the assessment of risks
of material .misstatement and the design:and performance of further audit-procedures"'.
Required:
Identify the assertions used by auditors in the following categories:
i. Assertions about account balances at the period end
ii. Assertions about presentation and disclosure.
Date posted: May 14, 2019. Answers (1)
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Summarise the audit work you would undertake to obtain reasonable assurance that the
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i. Specific allowance for doubtful debts.
ii. Trade payables.
Date posted: May 14, 2019. Answers (1)
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Explain how an auditor would carry out the verification of cash at bank.
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i. Land
ii. Rent expenses
iii....(Solved)
For each of the following items in the financial statements, identify hvo.forins of third party
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i. Land
ii. Rent expenses
iii. Motor vehicles
Date posted: May 14, 2019. Answers (1)
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Highlight six audit procedures that you would carry out to verify an acquisition of plant worth
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Date posted: May 14, 2019. Answers (1)
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Describe the audit work that should be carried out by an auditor on suppliers invoices in the
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Date posted: May 14, 2019. Answers (1)
- a) List four audit .procedures you would perform on credit notes issued to customers upon
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b) Explain why it is important for an auditor...(Solved)
a) List four audit .procedures you would perform on credit notes issued to customers upon
return of goods
b) Explain why it is important for an auditor to send a bank letter to his client's bank.
c) Summarize any six procedures that are undertaken by an auditor while obtaining
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Date posted: May 14, 2019. Answers (1)
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i) Analytical procedures
ii) Audit opinion.
iii) Audit working papers(Solved)
Briefly explain the following terms.
i) Analytical procedures
ii) Audit opinion.
iii) Audit working papers
Date posted: May 14, 2019. Answers (1)
- Choose the most reliable source of evidence from the two options given in each of the following
scenarios:
i) A bank reconciliation prepared by the Senior Chief...(Solved)
Choose the most reliable source of evidence from the two options given in each of the following
scenarios:
i) A bank reconciliation prepared by the Senior Chief Accountant of XYZ Ltd. or, A
bank confirmation received from a small branch of Zed Bank Ltd; bankers of XYZ
Ltd.
ii) Negative circularization received directly by the client from a major debtor of XYZ
Ltd. or; Positive circularization received directly by the auditor from a debtor with
respect to a debt that had earlier been written off.
iii) A logbook that shows vehicle registration number NEB 201 is registered under the
ownership of the CEO of XYZ Ltd. or; An oral representation by the CEO of XYZ
Ltd. assuring you that the car is owned by XYZ Ltd.
iv) An LPO drafted by the Storekeeper of XYZ Ltd who has been procuring goods for
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A Goods Received Note generated by the storekeeper and signed by the supplier upon delivery
of goods.
Date posted: May 14, 2019. Answers (1)
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b) Citing two examples in each case, describe...(Solved)
a. List eight factors that an auditor should take into consideration when determining the size
of an audit sample.
b) Citing two examples in each case, describe the quality of the following types of audit
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(i) Evidence originated by the auditor.
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(iii) Evidence created by the management of the client.
Date posted: May 14, 2019. Answers (1)
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(i) Vouching.
(ii) Verification(Solved)
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(i) Vouching.
(ii) Verification
Date posted: May 14, 2019. Answers (1)
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b) List four statutory, books that would be of interest to the auditor.
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Date posted: May 14, 2019. Answers (1)
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Date posted: May 14, 2019. Answers (1)
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a) Briefly describe the audit tests you would carry out to verify trade accounts receivable
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b) Describe the audit work you would carry out on the following replies to a receivables
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Date posted: May 14, 2019. Answers (1)
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