CHINHOYI UNIVERSITY OF TECHNOLOGY

GROUP ASSIGNMENT

MODULE NAME: ADVANCED AUDITING

LEVEL: 4.1

SURNAME NAME REG NUMBER

MAUWA MOREBLESSING K C20141050L

TEMBO GRACE F C20141599S

SITHOLE EVIDENCE C20141934M

AARON WISDOM C20141323D

MUFANDAEDZA NYASHA C20143141F

MATOWE NICHOLAS C20141170R

TANYONGANA AUTHENTIC A C20141355T

NDEBVU JACQUELINE A C20141187K

PUTIRE ENOCK C20143037R

Explain how you would do an audit of motor vehicles, suppliers(creditors) and wages and
salaries.

INTRODUCTION

To audit a company with highly mobile motor vehicles that cross international borders,
employees, customers both locally or abroad and various financial components such as suppliers,
wages and salaries. A comprehensive audit is essential. Evaluate the internal controls: Assess the
company's internal controls related to motor vehicles, suppliers, and salaries and wages. Examine
processes such as procurement, disbursement, inventory management, and payroll systems.

The following shows how you would conduct an audit of motor vehicles, suppliers (creditors)
and wages and salaries.

DEFINATION OF KEY TERMS

Audit – according to Public Accountants and Auditors Act [Chapter 27:12] means “the
verification or certification of financia1 statements, financial transactions, books, accounts or
records”.

Motor vehicle - it is a non-current asset (immovable) of a company that is recorded as an asset on

Suppliers(creditors) - they provide goods and services that have been purchased but not yet paid
for.

Wages and salaries - these are amounts that a company pays to its employees in exchange of
their work.
AUDIT OF SUPPLIERS:

PLANNING PHASE

Planning: This involves defining the scope of the Audit, identifying the key areas to be assessed,
and determining the audit criteria and objectives

1. Payment timeliness.

Test controls regarding the timely payments of creditors to assess whether payments are made in
accordance with contractual terms. Obtain a list of suppliers from the auditee’s records,
including contact details and transaction history. Request confirmations from selected suppliers
to verify the accuracy and completeness of accounts payable balances. This can be done through
direct communication with suppliers via mail, email, or an online confirmation platform.

2. Supporting documents.

Select a sample of suppliers and perform a detailed review of their invoice, purchase orders,
delivery notes and payments records. Test controls to confirm that creditor transactions are
supported by valid documentation, such as invoices, purchase orders, and receiving reports. Test
controls related to the matching of invoices, purchase orders, and receiving reports. (Matching
and Three-Way Match) Verify that the “three-way match” process is consistently applied to
ensure that only valid and properly authorized invoices are paid.

Ensure that these documents are complete and properly retained

Identify key suppliers and assess the risk of misstatements or irregularities in suppliers’
transactions.

AUDIT PHASE

1. Existence of suppliers

Confirm the existence and legitimacy of suppliers by contacting them directly and requesting
confirmation of outstanding balances. Examine supporting documentation for supplier
transactions such as purchase orders, invoices, receiving reports and payment records. Ensure
that the transactions are properly authorized, accurately recorded, and in compliance with
relevant accounting standards and company policies.

2. Segregation of duties.

Assess the adequacy of internal controls over the procurement process to prevent fraud or
misappropriation. A strong internal control established robust Internal control mechanisms
within the procurement Process. This includes segregation of duties, where Different individuals
handle different stages of the Procurement process to prevent collusion. Approval processes,
document verification, and clear Authorization procedures to ensure accountability and
Transparency.

3. Accuracy of recorded liabilities.

Select a sample of creditors accounts and verify the accuracy of recorded liabilities by
reconciling them with supplier invoices and purchase orders Review suppliers’ contracts and
agreements to determine the terms and conditions including privacy, discounts and credit terms.
Reconcile suppliers’ balance with the general ledger and supporting documentation ensuring
accuracy and completeness.

EXAMPLE

If the company sources of raw materials are from international suppliers, the auditor should
confirm the existence of contracts and review a sample of invoices and payments to ensure they
match the contract terms.
MOTOR VEHICLES

PLANNING PHASE:

1. Documentation of vehicle ownership and registration.

Obtain a list of all motor vehicles owned or leased by the auditee, including relevant details such
as make, model, registration number and ownership documents. Test the controls in place to
ensure that all vehicles are properly documented, including ownership titles and registration with
the appropriate authorities.

Verify that all vehicles in the fleet have valid registration and are appropriately titled. Check that
all vehicle documentation is correct, including ownership titles and registration with the relevant
authorities, by testing the controls in place. Check in order to make sure each fleet car is properly
titled and has a current registration.

2. Maintenance and inspection records

Asses the risk factors associated with the vehicles such as maintenance cost, cross border
operations and depreciation. Review fuel and expense logs for a sample of vehicles to verify that
fuel usage, repairs, and other expenses are accurately recorded.

Ensure that logs are maintained consistently and comply with the company's expense policies.

AUDIT PHASE:

1. Asset verification.

Physically inspect a sample of motor vehicles to verify their existence, condition and accuracy of
recorded information. Ensure that each vehicle matches the details in the company's records,
such as VIN numbers, license plates, and vehicle descriptions.

Examine maintenance and repair records to assess the conditional and reliability of vehicles and
invoices for cross border trips. Evaluate controls related to the documentation and retention of
vehicle-related records. Confirm that records are properly maintained, organized, and readily
available for audit and compliance purposes. Test controls on motor vehicles are essential for
maintaining accurate financial reporting, ensuring vehicle safety and compliance, and preventing
misstatements or fraud related to the company's fleet. These controls help organizations
effectively manage their vehicles and maintain their value.

2. Depreciation calculation.

Test the accuracy of depreciation calculations in the financial statements. Test controls around
the calculation of vehicle depreciation to ensure that it is accurately reflected in the company's
financial statements. Confirm that depreciation methods used are in compliance with accounting
standards. Motor vehicles should be valuated to determine the fair value using depreciation
methods. Review policies and procedures for accusation, disposal and usage of motor vehicles to
ensure compliance with relevant regulations.

Reconcile the motor vehicle register with the general ledger and supportive documentation to
ensure accuracy and completeness.

3. Insurance and compliance.

Verify insurance coverage for the vehicles and assess any potential liabilities or claims. Review
records to ensure that all vehicles are adequately insured and that the insurance policies comply
with local and international regulations. Verify that insurance premiums are paid and up to date.

EXAMPLE

If a company owns a fleet of 20 vehicles, the auditor should physically inspect and verify the
presence and condition of each vehicle. Cross border trips can be verified by examining fuel
receipts and border crossing records. Ensure that logs are maintained consistently and comply
with the company’s expense policies.
WAGES AND SALARIES

PLANNING PHASE:

1. Compliance with employment contracts and agreements.

Verify that payroll controls are in place to ensure that employment contracts, collective
bargaining agreements and other agreements are adhered to. Review a sample of employee
contracts and confirm that salaries and benefits comply with the terms. Identify the payroll
process and assess the risk of errors or fraud in wage and salary calculation.

2. Employee verification.

Test controls to verify that employees exist, are active and have accurate information. Confirm
the existence and employment status of selected employees through personnel files and
communication with the HR department.

AUDIT PROCEDURE

1. Payroll record keeping.

Obtain payroll records, including employee details, time sheets, tax withholding and payment
records. Test controls regarding the maintenance and retention of payroll records. Ensure that
records are organized and retained for the required time, as per regulatory and company policies.

2. Accuracy and payroll calculation.

Verify the accuracy and completeness of the payroll by selecting a sample of employees and
recalculate their wages based on the provided data and recalculating wages, taxes, and
deductions. Check for mathematical errors in the payroll processing.

3. Authorization and approval

Test a sample of payroll transactions for accuracy and authorization to ensure that changes to
employee salaries, wages, and benefits are properly authorized and approved. Confirm that
adjustments are supported by valid documentation (e.g., signed authorization forms).
Confirm the reconciliation of payroll expense with financial statements for example over time.

4. Segregation of duties

Ensure proper separation of payroll processing and dispensation duties for accuracy. Test
controls to ensure that duties related to payroll are adequately segregated. For example: Verify
that the same person who authorizes payroll changes does not also approve payments. Confirm
that individuals responsible for processing payroll are different from those responsible for
personnel actions.

Confirm senior man agent compensation to employment contracts.

EXAMPLE

If the company has employees in multiple countries, the auditor should review time sheets and
payroll calculations, ensuring compliance with labor laws in each jurisdiction.

CONCLUSION

Conclusively, auditors play a very crucial role in auditing motor vehicle, suppliers and wages
and salaries. Also, vehicles audit checklist is a great way to ensure that your vehicle maintenance
is current and in compliance with the latest regulations. Motor vehicle audit also helps in
physical inspection, reviewing policies and regulations and also accuracy and completeness.
Suppliers audit ensure accuracy and adequacy of internal controls over the procurement
processes and prevent fraud at any cost.
References

Public Accountants and Auditors Act [Chapter 27:12].