Reference no: EM132695504
You are an audit manager of David and Goliath Accounting Firm (DG) and listed some of substantive procedures you want to perform during the year end audit:
1. Select a sample of invoices and ensure that they have been properly recorded in the sales ledger.
2. Perform a debtors' confirmation (a.k.a. accounts receivable circularisation).
3. Attend the year-end stocktake and perform test counts on a sample of stock items.
4. Calculate the accounts receivable turnover and compare with previous year's turnover.
5. Ensure that interest paid on the bank loan is correct by multiplying the interest rate by the outstanding principal for each month of the year.
6. Send a letter to the bank to confirm a loan taken out by the company during the year.
7. Review all invoices received for one month after the year-end to ensure that they do not relate to the current year.
8. Select a sample of non-current assets and sight them.
9. Trace the last inventory received before the year-end to the inventory listing.
10. Review the adequacy of the company's allowance for doubtful debts.
11. Review the income statement for unusual differences in the balances recorded for this year and last year.
12. Send debtor's confirmation letters to a number of the client's customers.
13. Recalculate depreciation charges.
14. Calculate gross profit rates for the current year and preceding year.
15. Discuss the potential obsolescence of inventory with the management.
16. Examine registration certificates for motor vehicles purchased during the year.
17. Use the computer to scan a file to determine that all documents in a numbered series have been accounted for.
18. Learn about a possible lawsuit in conversation with the financial controller.
19. Obtain a valuation of land held by the company interstate.
20. Observe the year-end inventory count.
21. Select a sample of repairs and maintenance expenses and check whether any should have been capitalised.
22. Review the company-prepared bank reconciliation.
23. Obtain the company's depreciation rates from the financial statements and check they have been applied correctly.
24. Perform accounts receivable circularisation.
25. Ensure that all contingent liabilities have been included in the notes to the accounts.
REQUIRED:
Problem 1: Name the type of substantive audit procedure in EACH of the above and provide ONE key financial statement assertion to which it significantly relates.