1-Pager [Updated for Autumn 2023] Key Audit Procedures [Frequently Tested Areas]

Insurance Receivable Tangible Non-Current Assets

 Read Insurance Policy. For Depreciation:
 Inspect communication.  Review Fixed Assets' Register.
 Record only if virtually certain.  Recalculate depreciation on sample.
 Check estimates are reasonable (e.g. rate, life, residual
Litigations value). Engage Expert, if necessary.
 Inspect Communication.  Review gain or losses on disposals
 Written representation (on likely settlement).  Compare ratio of depreciation.
 Effect of Subsequent events
 Possibility/Impact of regulatory action. For Impairment:
 Ask management to carry out impairment review.
Warranty  Check source data and assumptions of working.
 Inspect sales agreement.  Physically inspect condition
 Check reasonableness of cost of warranty repair.  Engage expert, if necessary.
 Discuss nature of defect in inventory, and impact on
other areas. For Additions:
 Subsequent events, and their impact on recognition.  Obtain list and agree with F/S.
 Written representation.  Inspect authorization
 Inspect sale deed etc.
Loss by Fire/Flood  Inspect supplier’s invoice
 Physically inspect location.  Check date of capitalization.
 Assess reasonableness of inventory/assets balance at  Test calculation of depreciation [start when asset ready
location. for use]
 Appropriate accounting and disclosures (e.g.  Physically inspect
Impairment, NRV, Loss). Use Expert, if needed.  Re-assess useful life

Inventory count at other than B/S date For Disposal:

 Inventory count at other date.  Obtain list and agree with F/S.
 Prepare reconciliation.  Inspect authorization.
 Inspect documents for intervening transactions.  Inspect sale invoice etc.
 Verify removal from books and register.
Physical Verification not possible  recalculate profit or loss.
Perform alternative procedures i.e.  Inquire management possibility of unrecorded disposals.
 Inspect documents (e.g. GRN).
 Use technology (e.g. drone cameras, video calls) For Revalued Asset:
1. Evaluate Competence, Capability and Objectivity of Expert.
Impairment of Fixed Assets 2. Evaluate Adequacy of work of Expert.
 Ask management to test impairment. 3.Evaluate Accounting/Disclosures:
 Obtain working, review source data and assumptions to  Agree with valuer’s report.
check reasonableness.  Valuation is up-to-date.
 Use of expert to verify working.  Entire class revaluated.
 Evaluate method to ensure consistency.
Bankruptcy of a specific debtor  Recalculate revaluation surplus.
 Inspect agreement with customer, and check for security.  Physically inspect condition.
 Send confirmation letter to liquidator to confirm  Appropriate disclosure.
expected recovery.  Written Representation (on reasonableness of
 Check subsequent collection, if any. assumptions)
 Inquire management about expected recovery.
For Self-constructed Fixed Asset:
Trade Receivables  Inspect permission of authorities
Procedures to ensure Provision for bad debts:  Physical verification.
 Evaluate basis of provisioning.  For sample of cost, inspect Suppliers’ invoice, Payroll
 Aging analysis records, and relevant evidence.
 Subsequent clearance and write-off.  Review list of capital expenditure.
 Evaluate disputed receivable.  Discuss capitalization policy.
 Assess historical accuracy.  Compare budget with actual cost.
 Expert’s assessment of stage of completion.
Trade Payables  Depreciation starts when asset is available for use.
Procedures to ensure Completeness:  Presentation and Disclosures.
 Cut-off on purchases.
 Inspect pending GRN. Reconciliations [Bank, Debtors, Creditors]
 Subsequent clearance.  Cast Reconciliation.
 Compare list of suppliers with last year.  Agree balance with GL and supporting record.
 Compare account statement with relevant ledger account  For timing differences, check they are cleared in next
month.
 For specific errors/omission, perform specific
procedures.

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1-Pager [Updated for Autumn 2023] Key Audit Procedures [Frequently Tested Areas]

Intangible Non-Current Assets

Goodwill: Loan Agreement
 Inspect approval.  Read and check compliance.
 Inspect sale agreement.  Ensure client is able to repay, or alternate arrangements.
 Inspect due diligence report.  Check subsequent status (e.g. renewal)
 Recalculation.
 Adequacy of disclosures. Legal Case
For Amortization/Impairment:  Read Board Minutes.
 Understand management’s process.  Inspect case file.
 Check annual impairment testing.  Letter to lawyer.
 Evaluate appropriateness of assumptions used in  Evaluate subsequent event.
impairment testing.  Review adequacy of provision and/or disclosures.
 Engage expert, if necessary.  Management Representation
 Obtain written representation (about assumptions)
 Check valuation Non-current assets held for sale
 Read minutes of board meeting to check approval to sell
Development Cost: assets.
 Check recognition criteria (PIRATE).  Review steps taken by management to sell the assets e.g.
 Discuss feasibility and obtain representation. any correspondence or agreement with prospective
 Discuss any technical problem/ impairment. buyer.
 Review development cost for classification.  Check whether non-current assets held for sale are
 Select a sample, and inspect supporting documents. o Measured at fair value.
 Test controls over scientists’ documentation. o Presented separately in balance sheet under
Current Assets.
Other Intangibles: o No more depreciated.
 Inspect approval.  Obtain valuation report of expert to confirm fair value of
 Inspect legal documents. assets.
 Check reasonableness of life.  Check that discontinued operations are separately
 Discuss for impairment. presented, and disclosed.

Inventory Provision for restructuring/ staff termination

NRV Valuation:  Obtain working papers prepared by client for
 Aging analysis. restructuring provision.
 Check physical condition.  Obtain list of redundant employees and ensure all of them
 Discuss increase in inventory. are included in calculation.
 Ask management to carry out impairment review.  Inquire from terminated employees regarding agreed
 Check source data and assumptions of working. remuneration.
 Read minutes of board meeting to identify final
Stock Count at interim date: settlement with labour union etc.
 Physically verify at interim date.
 Obtain record of interim sales and purchases. Foreign Currency Transactions & Receivable/Payables
 Verify record with supporting document.  Read contracts for in-transit Purchase/Sales Orders.
 Estimate closing stock.  Tests of Controls for correct translation of foreign
currency.
Stock held with third parties:  Gain/loss on closing balances of foreign currency
 Obtain inventory report recorded as income/expense.
 Visit location
 Engage component auditor.
 Send Confirmation Letter

Please note that:

 This is a list of most important areas tested in exam, but not a complete list. You still have to read the chapter 10 &
11 in the book.
 you can memorize procedures in Key Words, but have to write in exam in Complete Sentence Form.
 In a Case Study, do not blindly reproduce audit procedures if whole area. You have to write only that part of the area
which is relevant to case.

Prepared by: Muhammad Asif, FCA

Assisted by: Atif Farooq

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