Midterm Output - AUDIT SIMULATION - GROUP 7

To: Mr. David Sheridan
Managing Director
Sheridan Audio Visual Ltd
Dear Mr. Sheridan
Peace Good day! I‟m writing this letter to discuss about the legal requirements for audit of both a
private limited company and a public limited company listed on the stock exchange, the statutory duties
of the auditor, the statutory duties of the directors for reporting the financial results of the business and
the advantages of having an audit.
Both private and public companies are subject to generally accepted accounting principles (GAAP),
although for different reasons. The SEC requires publicly traded companies to provide GAAP-
compliant audited financial statements. Private companies may be subject to GAAP to satisfy
lenders, certain classes of shareholders, or insurance companies. However, many private companies
don't issue audited financial statements. Their main concern is minimizing taxes and therefore they
often only prepare tax returns and unaudited statements. As per companies act, all companies have to
maintain books of accounts and get it audited by a chartered accountant in practice every year after
closing of each financial year.
 Such audited report along with the financial statements and annual return prepared by the
company‟s management are required to be filed with the Registrar of companies of the state
where such companies are registered.
 There is no time limit for conducting company‟s annual audit. There are some other provisions
which specify the time limit of getting books of accounts audited.
 Every private limited company need to conduct their annual general meeting within 6 month
from the end of the financial year to present audited financial statements before the
shareholders.
Let‟s understand the term Statutory Audit first. Statutory basically means anything which comes under
the regulations set by the government. Audit basically means an inspection. Therefore, Statutory Audit,
in turn, means an inspection under the regulations set by a government authority. It is basically done to
assess the financial position of a company.
The statutory duties of the auditor should ensure that balance sheet and profit and loss account have
been made on the basis of accounting books and evidences. Auditor should give all information in the
prescribed manner and auditors that he should express his opinion in his report.
It is the duty of an auditor that he should see whether company fulfills all legal compliance. He should
read all related laws' provisions updates.
According to section 227 of Indian Company Act 1956, " Following are main statutory duties of an
auditor:
 It is the statutory duty to give report on the accounts which are audited by him.
 To give audit report of balance sheet and profit and loss account.
 To audit the documents which are attached with balance sheet and profit and loss account of
company.

The statutory duties of the directors for reporting the financial results of the business. The director of
the company they are obligated to prepared financial statements for the year that ended notes to the
financial statement and their declaration about the given statements.
The directors are responsible for keeping proper accounting records which disclose with reasonable
accuracy at any time the financial position of the Company, for safeguarding the assets, for taking
reasonable steps for the prevention and detection of fraud and other irregularities and for the
preparation of a directors‟ report and directors‟ remuneration report.
For the advantages of having an audit.
Compliance
Obviously this is one of the main reasons to conduct an audit: to meet the statutory requirements and
regulations in your industry. An audit provides complete peace of mind for business owners and
shareholders that the organisation is 100% compliant with all of its current statutory obligations. Non-
compliance runs the risk of incurring heavy fines, loss of customers and a tarnished reputation –
damage that far outweighs the cost and any minimal, temporary inconvenience that may be caused by
an audit.
Business Improvements / System Improvements
A thorough, in-depth audit takes an impartial look at your organisation‟s internal systems and controls.
This means it‟s an ideal opportunity for the auditing experts to suggest improvements that can make
your business more efficient. Ways to improve internal controls, business systems, accounting
practices, efficiencies, governance and culture can all be identified through the audit process.
Credibility
An audit provides independent verification that the financial statements are a true and fair
representation of the entity‟s current situation. This provides invaluable credibility and confidence to
your organization‟s customers/clients, stakeholders, investors or lenders and even potential buyers. It is
confirmation that financially everything is as it appears to be.
Detect and Prevent Fraud
It‟s estimated that up to 30% of New Zealand businesses are subject to fraud, error and corruption.
Workplace fraud can occur for years without being detected and can be so substantial that some
businesses never recover financially or repair their reputations. An audit can be an effective tool for
identifying fraud and opportunities to commit fraud. Experienced auditors are skilled at pinpointing
weaknesses in an organization‟s systems and controls and suggesting ways to strengthen these to
prevent fraud occurring.
Better Planning and Budgeting
An audit confirms the accuracy of an organization‟s financial statements by analyzing its financial
transactions. It‟s a detailed process and can result in certain types of income, expenditure, assets and
liabilities being scrutinized. This critical examination, coupled with the auditor‟s financial expertise, can
then be used by business owners for better financial planning, budgeting and financial decision-making
for the future.

(The Auditor)
Acknowledged on behalf of Sheridan Audio Visual Ltd
By:
(signed)
......................
Name and Title
Date

Planning visit
Minutes of the meeting conducted by Mr. Moore:
 Development Sheridan AV over the past year. Of the financial year up to 31 March 2021
 As of March 31st, the company record a doubled turnover compared last year
 Increased number of companies that purchases their product and increased volume of Trade.
 Planning to make a TV advertisements
 Planning to have expansion on Europe
 Managing accounts are not formally documented.
 Planning to make it formally documented
 Bunos scheme is expected have a documentation
 There were always technical errors on management account in the two consecutive meetings
based on the documented minutes.
 Asking question about the computer system to record the account
 There some problem in ledger
 There is a bit wrong in the management based upon the interviews and calls
 High risk of materiality because of some errors.

INTERNAL CONTROL QUESTIONNAIRE
CONTROL ENVIRONMENT
QUESTION YES, NO, N/A Comments
Integrity and Ethical Values
1. Does the management set the “tone at the top”
by demonstrating a commitment to integrity and
ethics through both its words and deeds?
2. Have appropriate entity policies regarding
acceptable business practices, conflicts of
interest, and codes of conduct been established
and adequately communicated?
3. Have incentives and temptations that might lead
to unethical behaviour been reduced or
eliminated?
NO
NO
NO
 The entity lacks of Integrity
and ethical values,
because The
management‟s actions to
eliminate or mitigate
incentives and temptations
on the part of personnel to
commit dishonest, illegal,
or unethical acts
Board of directors and audit committee
1. Are there regular meetings of the board and are
minutes prepared on a timely basis?
2. Do board members have sufficient knowledge,
experience and time to serve effectively?
3. Is there an audit committee composed of outside
directors?
NO
NO
NO
 The management didn‟t
always keep in touch,
 Board members shows
lack of knowledge
 They don‟t have audit
committee.
Management’s philosophy and operating style
1. Are business risks carefully considered and
adequately monitored?
2. Is management‟s selection of accounting
principles and development of accounting
estimates consistent with objective and fair
reporting?
3. Has management demonstrated a willingness to
adjust the financial statements for material
misstatements?
NO
N/A
NO
 The management has no
audit committee nor
internal auditor to assess
and monitor
 The person in charge in
accounting practice is not
willing to adopt the new
accounting system
 The entity has an informal
way in presenting their
accounts
Human resource policies and practices
1. Do existing personnel policies and procedures
result in the recruitment or development of
competent and trustworthy people needed to
support an effective internal control structure?
2. Do personnel understand the duties and
procedures applicable to the job?
3. Is the turnover of personnel in key positions at
an acceptable level?
NO
NO
NO
 The management are
more focused on finding
new staff

INTERNAL CONTROL QUESTIONNAIRE
ORGANISATIONAL CONTROLS
QUESTION YES, NO,
N/A
Comments
Organisational controls
1. Are the following duties segregated within
the computer department:
 Systems design?
 Computer programming?
 Computer operations?
 Data entry?
 Custody of systems documentation,
programs and files?
 Data control?
2. Are the following duties performed only
outside the computer department:
 Initiation and authorisation of
transactions?
 Authorisation of changes in systems,
programs and master files?
 Preparation of source documents?
 Correction of errors in source
documents?
 Custody of assets?
NO
NO
NO
NO
NO
NO
N/A
N/A
N/A
N/A
N/A
 The entity has no specialist IT staff
 The management do not have a
great deal of knowledge about
computers
Systems development and maintenance controls
1. Is there adequate participation by users and
internal auditors in new systems
development?
2. Is proper authorisation, testing and
documentation required for system and
program changes?
3. Is access to systems software restricted to
authorised personnel?
4. Are there adequate controls over data files
(both master and transaction files) during
conversion to prevent unauthorised
changes?
N/A
N/A
NO
N/A
 The management is
unknowledgeable on
appointing authorized
personnel
Access controls
1. Is access to computer facilities restricted to
authorised personnel?
2. Is access to data files and programs
restricted to authorised personnel?
3. Are computer processing activities
reviewed by management?
NO
NO
NO
 Management seems not to
give importance to
restrictions and personnel
authorization
Other controls
1. Is there a disaster contingency plan to
ensure continuity of operations?
2. Is there off-site storage of back-up files and
programs?
3. Are sufficient generations of programs,
master files and transaction files maintained
to facilitate recovery and reconstruction of
computer processing?
YES
YES
YES
 The management has no
formal plan or s but it has
considered threats to the
computer hardware and
Software so they implemented controls that
will deal with these threats.

4. Are there adequate safeguards against fire,
water damage, power failure, power
fluctuations, theft etc?
YES

POTENTIAL RISKS
Risk Factors relating to industry conditions Consider if this presents a risk and if so consider how this
will be addressed
New accounting, statutory, or regulatory requirements that
could impair the financial stability or profitability of the entity
 The entity is advantage to know about
the new accounting, statutory, or
regulatory requirements to know how it
impacts the stability or profitability of
the entity.
High degree of competition or market saturation,
accompanied by declining margins
 Evaluate the entity‟s performance
Declining industry with increasing business failures and
significant decline in customer demand
 Evaluate and assess the risk and
cause of the failures and immediately
respond to it.
Rapid change in the industry, such as high vulnerability to
rapidly changing technology or rapid product obsolescence
 Evaluate the entity‟s performance and
have an overview about the flexibility of
the entity.
Risk Factors relating to operating characteristics and
financial stability
Consider if this presents a risk and if so consider how this
will be addressed
Inability to generate cash flows from operations while
reporting earnings and earnings growth
 Have a mandatory requirement to
present FS in a formal and timely
manner
Significant pressure to obtain additional funds to finance for
example expansion
 Evaluate the entity‟s performance and
have an overview about the flexibility of
the entity.
Significant related party transactions not in the ordinary
course of business or with related entities not audited or
audited by another firm
 Testing how related-party transactions
are identified and coded in the
company‟s enterprise resource
planning (ERP) system, interview the
accounting personnel responsible for
reporting related-party transactions in
the company‟s financial statements,
and analyze the presentation of
related-party transactions in financial
statements.
Unusually rapid growth or profitability, especially compared
with that of other companies in the industry
 Assess the risk of material
misstatement of the financial
statements due to fraud and consider
that assessment in designing audit
procedures to be performed.
Unrealistically aggressive sales or profitability incentive
programmes
 Ask the necessary documents and
must supported by evidences
Threat of imminent bankruptcy or foreclosure, or hostile
takeover
 Review and conduct ways to avoid
foreclosure
Risk Factors relating to management Consider if this presents a risk and if so consider how this
will be addressed
A significant portion of management‟s compensation is
represented by bonuses, stock options or other incentives,
the value of which is contingent upon the entity achieving
unduly aggressive targets for operating results, financial
position, or cash flow
 The financial statements must be
properly reviewed and provided by
evidences.
Management setting unduly aggressive financial targets and
expectations for operating personnel
 Advise the management to display and
communicate an appropriate attitude
regarding internal control and the
financial reporting process.

Management continuing to employ an ineffective accounting,
information technology or internal audit staff
 Advise the management to properly
select and hire skilled, independent
and competent accounting and audit
staff
Domineering management behaviour in dealing with the
auditor, especially involving attempts to influence the scope
of the auditor‟s work
 Advise the management to collaborate
to the auditor so that the auditor can
produce a good audit.
Formal or informal restrictions on the auditor that
inappropriately limit his or her access to people or
information or his or her ability to communicate effectively
with the board of directors or audit committee
 Auditor will ask for assistance in order
to get the information required to be
fully effective and efficient.
Risk Factors relating to susceptibility of assets to
misappropriation
Consider if this presents a risk and if so consider how this
will be addressed
Large amounts of cash on hand or processed  Perform a detailed review of the entity's
quarter-end or year-end adjusting
entries and investigate any that appear
unusual as to nature or amount.
Inventory characteristics, such as small size, high value, or
high demand
 Have a regular physical count.
Risk Factors relating to controls Consider if this presents a risk and if so consider how this
will be addressed
Lack of appropriate management oversight (for example,
inadequate supervision or monitoring of remote locations)
 Have a surprise visit to different
locations including remote ones
Inadequate record keeping with respect to assets
susceptible to misappropriation
 Visit locations or perform certain tests
on a surprise or unannounced basis.
Lack of appropriate segregation of duties or independent
checks
 Advised the management to have
proper segregation of duties.
Lack of appropriate system of authorisation and approval of
transactions
 Obtain sufficient appropriate evidence
to corroborate management's
explanations
Poor physical safeguards over cash, investments, inventory
or non current assets
 Alter the audit approach in the current
year
Lack of mandatory holidays for employees performing key
control functions
 Conduct interviews of personnel
involved to obtain their insights about
the risk and whether or how controls
address the risk.

PRELIMINARY ANALYTICAL REVIEW
It is mandatory that the auditor should perform risk assessment for the identification and
assessment of risks of material misstatement at the financial statement and assertion level, and the risk
assessment procedures should include analytical procedures It is also mandatory that the auditor
should perform analytical procedures near the end of the audit that assess whether the financial
statements are consistent with the auditor‟s understanding of the entity.
Analytical procedures are also commonly used in non-audit and assurance engagements, such
as reviews of prospective financial information, and non-audit reviews of historical financial information.
While the use of analytical procedures in such engagements is not covered in the ISAs, the principals
regarding their use are relevant.
Preliminary analytical reviews are performed to obtain an understanding of the business and its
environment financial performance relative to prior years and relevant industry and comparison groups
to help assess the risk of material misstatement in order to determine the nature, timing and extent of
audit procedures, to help the auditor develop the audit strategy and programmed.
Preliminary analytical review is basically tests are needed as evidence to support the assertion
that the financial records of an entity are complete, valid, and accurate. Most of firms were taking this
into consideration that during planning, majority were all much ready to let planning activities 'occur' as
part of the fieldwork. There is a greater emphasis on planning activities that have placed on risk
standards and risk assessment procedures and focus as an integral part of the risk based audit
approach. Drawing comparisons to the types of procedures is a good way to understand the role of
preliminary analytical review in an audit in performing a review engagement.

DETERMINING MATERIALITY LEVEL
Depending on the audit risk, auditors will select different values inside these ranges.
5% to 10 of total revenue
1% to 2% of total assets
1% to 2% of gross profit
2% to 5% of shareholders‟ equity
5% to 10% of net income
To detect the misstatements that could be material to the financial statements taken as a whole, the
auditor selects 5% of revenue, 1% of total assets, 1 % of gross profit, 2% of shareholders equity and
5% of net income to be the material level.
Statement base (Dec. 31 2020) Amount Materiality level
Revenue 5,410,175 270,508.75
Total assets 3,055,151 30,551.51
Gross profit 961,809 9,618.09
Shareholder’s equity 1,193,831 23,876.62
Profit before tax 75,270 3,763.5
Therefore, the amount less than the materiality level will be considered as immaterial

Short document about the assessment of risk in this audit and how this will affect subsequent
work
In conducting the audit engagement, in accordance with International Standards on Auditing
(ISAs), the risk assessments that are to be conducted will focus on the financial statements of Sheridan
Audio Visual Ltd, which comprise the balance sheet as at December 31, 20X1, and the income
statement, statement of changes in equity and cash flow statement for the year then ended, and a
summary of significant accounting policies and other explanatory information.
Auditors must determine risks when working. One type of risk to be aware of is inherent risk.
While assessing this level of risk, you ignore whether the client has internal controls in place such as a
secondary review of financial statement in order to help mitigate the inherent risk. You consider the
strength of the internal controls when assessing the client‟s control risk. Your job when assessing
inherent risk is to evaluate how susceptible the financial statement assertions are to material
misstatement given the nature of the client‟s business.
Planning analytics to shine light on risks. Provided by the draft accounts, minutes of the
meeting and other relevant documents, all will be made use for identifying whether there are
unexplained variations in the numbers, for the reason that these present fraud signals.
In addition, the potential risks and control environment questionnaire results will serve as a
guide and limit the scope to where the audit must pay more emphasis on.
Together with the inherent limitations of internal control, there is an unavoidable risk that some
material misstatements may not be detected, even though the audit is properly planned and performed
in accordance with ISAs. However, we will communicate to you in writing concerning any significant
deficiencies in internal control relevant to the audit of the financial statements that we have identified
during the audit.

AUDIT ENGAGEMENT LETTER
To: Mr. Sheridan
Managing Director
Sheridan Audio Visual Ltd
Dear Mr. Sheridan
You2 have requested that we audit the financial statements of Sheridan Audio Visual Ltd, which
comprise the balance sheet and the income statement, statement of changes in equity and cash flow
statement for the year then ended,. We are pleased to confirm our acceptance and our understanding
of this audit engagement by means of this letter. Our audit will be conducted with the objective of our
expressing an opinion on the financial statements.
We will conduct our audit in accordance with International Standards on Auditing (ISAs). These
standards require that we comply with ethical requirements and plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in
the financial statements. These procedures include assessing the accounting principles used and
significant estimates made by management, assessment of the risks of material misstatement of the
financial statements, whether due to fraud or error.
Based on the inherent limitations of an audit, together with the inherent limitations of internal control,
there is an unavoidable risk that even some material misstatements may remain undiscovered, even
though the audit is properly planned and performed in accordance with ISAs.
In making our risk assessments, we consider internal control relevant to the entity‟s preparation of the
financial statements in order to identifying and assessing the risks of material misstatement through
understanding the entity and its environment, gives extensive guidance to auditors about audit risk
assessment
Our audit will be conducted on the basis that management acknowledge and understand that they have
responsibility:
1. For the preparation and fair presentation of the financial statements in accordance
with the International Financial Reporting Standards
2. For such internal control as management determines is necessary to enable the

preparation of the financial statements that are free from material misstatement,
whether due to fraud or error; and
3. To provide us with:
(i) Access to all information of which [management] is aware that is relevant to the preparation
of the financial statements such as records, documentation and other matters;
(ii) Additional information that we may request from [management] for the purpose of the audit;
and
(iii) Unrestricted access to persons within the entity from whom we determine it necessary to
obtain audit evidence.
As part of our audit process, we will request from management, written confirmation concerning
representations made to us in connection with the audit.
We look forward to full cooperation from your staff during our audit. We trust that they will make
available to us whatever records, documentation and other information are requested in connection
with our audit. Our fees, which will be billed as work progress, are based on the time required by the
individuals assigned to the engagement plus out-of-pocket expenses. Individual hourly rates vary
according to the degree of responsibility involved and the experience and skill required.
Please sign and return the attached copy of this letter to indicate that it is in accordance with
your understanding of the arrangements for our audit of the financial statement
Alex Gold
Acknowledged and agreed on behalf of Sheridan Audio Visual Ltd by
(signed)
__________________________
Name and Title
Date

Interim Visit 1
Internal Control - Accounts Receivable and Credit Sales
Typical errors or irregularities include:
 Sales amounts recorded incorrectly
 Goods shipped but not billed to customer
 Goods billed to customer but not shipped
 Sales recorded in wrong accounting period
 Goods sold to customers who were bad credit risks
 Sales occurred that were not authorized
 Sales posted to wrong account
 Unauthorized write-offs of receivables may have occurred.
Internal Control Questionnaire
These questions are designed around the perfect sales system. If the control does not exist then you
tick „No‟. The auditor then uses this information to identify weaknesses in the current sales system and
relate them to what could go wrong in the accounts.
“Can only approved customers be included in the sales ledger?” Yes No
1 Do all prospective customers undergo credit approval procedures?
If so
2 Must a standard, signed, application form be submitted?
3 Are two forms of identity obtained and details checked to application form?
4 Are credit references obtained?
5 Are credit limits set for all credit customers?
6 Are credit limits reviewed:
every 3 months
where debtor days exceed 3 months
where the debtor balance exceeds 75% of the credit limit
7 Where a credit limit is set above £100 is this based on either a recent set of published
accounts or past transaction history?
8 Are all new account applications signed as authorised by the Accounts Manager?
Continued...
“Can orders only be accepted for recognised customers within their credit limit?” Yes No
1 Are credit sales orders accepted only for approved customers (on the sales ledger)
2 Are all orders checked against the current sales ledger balance

3 Are all orders that take the balance to within 75% of the credit limit passed to the sales
manager for approval
4 Do all orders record an order approval reference number or get signed by the credit
controller
5 Is an aged debtor analysis prepared each month?
6 Are systems of chasing letters/solicitors letters in place for all balances outside of payment
terms?
7 Are customers in default immediately put on stop?
“Do all goods despatched result in a customer being invoiced?” Yes No
1 Are orders recorded on a pre-numbered sales order
2 Are pre-numbered goods despatch notes raised for all goods taken from stores?
3 Can a Goods despatched note (GDN) only be raised on the basis of an approved sales
order?
4 Are GDNs matched/retained with sales orders?
5 Does someone independent of the warehouse check goods leaving the premises with the
related GDNs?
6 Do customers sign for all goods accepted?
7 Are any queries agreed with the driver and recorded on the GDN?
8 Do both parties sign the amendments to the GDN?
9 Are signed GDNs/orders checked back in by the warehouse and any changes approved?
10 Does the warehouse manager check the sequence of GDNs to ensure all returned by the
driver?
11 Are all GDNs passed to the sales ledger department?
12 Are all invoices raised based on the GDN set?
13 Is a copy of the GDN referenced to the sales invoice number and filed in numerical order?
14 Does the accounts manager check the sequence of processed GDNs each month?
15 Does the accounts manager check invoices for accuracy and validity (based on approved
sales order, GDN and price lists)
Continued...
“Are all invoices raised recorded in the sales ledger?” Yes No
1 Is the invoicing assistant a different person to the sales ledger assistant?
2 Are invoices recorded in the sales day book in numerical order
3 Does the accounts manager check the sequence of invoices recorded in the sales day

book, each month?
4 Are invoice sets filed in numerical order?
5 Is the sales ledger assistant a different person to the invoicing assistant?
6 Are the sales day book totals posted to the main ledger by the Accounts Manager (as
distinct from the sales ledger assistant)?
7 Is sales ledger control account reconciliation performed by the accounts manager every
month?
8 Are statements issued monthly to active sales ledger accounts?
9 Is the statement run checked against the list of balances by the accounts manager?
“Can items in the sales ledger only be cleared by valid payment, credit note or
journal entry?”
Yes No
1 Are all credit notes approved by the sales manager?
2 Does the accounts manager review all material credit notes issued during the month?
3 Can journal entries only be entered by the Accounts Manager?
4 Are cash receipts posted from the cash book each month
5 Is sales ledger control account reconciliation performed by the accounts manager every
month?
Continued...
“Is all cash received correctly identified, recorded, posted and promptly banked?” Yes No
1 Is all cash received in the post recorded immediately into a cash diary, to which it is cross
referenced?
2 Do at least two people open the post?
3 Is all cash received then passed immediately to the cashier, intact?
4 Is the cash receipts book written up by the cashier before lunch each day?
5 Is cash banked daily?
6 Is cash banked intact?
7 Is the time and route of the daily banking varied each day?
8 Is proper insurance held to cover loss on the premises or in transit?
9 Is fidelity insurance in place for all staff?
10 Is all cash retained on site kept in a locked safe?

11 Does the accounts manager check a sample of the cash diary daily takings to the cash
book?
12 Is the cash book posted to the sales ledger by someone different to the cashier?
WEAKNESSES RECOMMENDATIONS
1. Sales amounts recorded incorrectly Management should reconcile the balances
between the general ledger, subsidiary records
and the inventory count and account for the
discrepancies.
Maintain a complete and updated subsidiary
record for each of the inventory item traded by the
Agency. Each record should contain all necessary
information relative to the inventory items
2. Sales recorded in wrong accounting
period
Make correcting entries when you find errors.
There are two ways to make correcting entries:
reverse the incorrect entry and then use a second
journal entry to record the transaction correctly, or
make a single journal entry that, when combined
with the original but incorrect entry, fixes the error.
3. Goods sold to customers who were bad
credit risks
Management can use a business strategy called
“credit control” that promotes the selling of goods
by extending credit to customers. Most businesses
try to extend credit to customers with a good credit
history so as to ensure payment of the goods or
services.
4. Sales posted to wrong account If you originally posted to the wrong account, you
might need to adjust the entire entry. Or, you might
have to make a minor adjustment. If you need to
make a correcting entry, do the following:
 Find out all the accounts that are affected
by the error.
 Determine the amount that needs to be
adjusted.
You must make new entries for the correction. Use
the same accounts as the original posting for the
correcting entry.
5. Unauthorized write-offs of receivables
may have occurred.
Double check cash discounts and make sure
customers have earned the discounts by following
sales terms and conditions. Resolve any
differences of interpretations by meeting, phone, or
e-mail and confirm the agreement. Otherwise,
these will become systemic drip of profits.

Interim Visit 2
Purchase and Payments
FUNCTION POTENTIAL
MISSTATEMENT
NECESSARY
CONTROL
POSSIBLE TEST OF
OPERATING
EFFECTIVENESS
INITIALS DATE
Requisitioning
goods and
services
Goods may be
requisitioned for
unauthorised
purposes
General and specific
authorisation
procedures
Inquire about
procedures September 10, 2020
Preparing
purchase
orders
Purchases may be
made for
unauthorised
purposes
Approved purchase
requisition for each
order
Examine purchase
orders for approved
requisitions
September 10, 2020
Receiving
goods
Goods received may
not have been
ordered
Incorrect quantities,
damaged goods, or
incorrect items may
be received
Approved purchase
order for each
shipment
Receiving clerks to
count, inspect and
compare goods
received with
purchase order
Examine goods
received note for
matching purchase
order
Observe performance
by receiving clerks
September 10, 2020
Storing goods
received for
inventory
Stores clerks may
deny taking custody
of purchased goods
Obtain signed
receipt upon delivery
of goods from
Receiving to Stores
Inspect signed
receipts September 10, 2020
Approving the
invoice
Invoices may be
recorded for goods
not ordered
Matching purchase
order and goods
received note with
supplier‟s invoice
Examine supporting
documentation for
invoices
September 10, 2020
Recording the
liability
Invoices may be
recorded incorrectly
or not recorded
Independent check
of agreement of
prelist against
amounts recorded in
purchase journal
Periodic accounting
for pre-numbered
goods received
notes and purchase
orders
Periodic
performance reviews
by management of
reports comparing
Examine evidence of
independent check;
reperform
independent check
Observe procedure;
reperform
Inquire of
management about
results of
performance reviews;
inspect reports
September 10, 2020

actual asset,
payables and
expense balances
with budgeted
amounts

Trade Payables
Errors and irregularities include:
1. Purchases may have been recorded to the wrong account
2. A liability may have been set up for a fictitious company
3. The purchase and liability may have been recorded in the wrong accounting period
4. A purchase or liability may have been omitted
5. Purchases may have been recorded but the merchandise may not been received.
YES NO COMMENTS
Has a purchase requisition to be raised for all
purchases?
With this document, procurement doesn‟t order goods
directly from vendors but instead initiates a formal
process. And that process is what provides the
company internal control over the purchasing process
Is the purchase requisition pre-numbered? Financial documents should be pre-numbered to
ensure all transactions are recorded and accounted
for.
Has a purchase order to be raised for all
purchases?
It necessary to be recorded in the books by the
account manager
Are purchase orders pre-numbered? Pre-numbered purchase orders ensure the
completeness and identify “missing” orders.
Do purchase orders have to be approved? For any purchase order to be a legally binding contract,
it must pass the internal approval processes of both
the buyer and vendor.
Are vendor‟s monthly statements reconciled to
the purchase ledger?
Reconciling your vendor statements allows you to
ensure that there are no mistakes or inaccuracies
between what the vendor is charging you and the
inventory, services or supplies you received
Do adjustments to accounts payable require
the approval of a responsible official?
It is required that adjustments to accounts payable be
approved by a responsible official.
Are all vendors‟ invoices checked for proper
pricing, extensions, footings, and terms?
Invoices are checked occasionally.
Does the company ensure that claims for
damaged merchandise are processed
promptly?
When there is any problem with the delivery, then the
goods are returned with the driver and the purchase
ledger clerk is informed.
Are unmatched invoices, receiving reports,
and purchase invoices reviewed periodically?
Timely payments are ensured by periodic reviews of
files of unmatched receiving reports and invoices and
by the aging of open accounts payable
Are supporting documents reviewed by
cheque signers prior to payment?
It should be reviewed from Purchase Ledger to the
authorization of the payment and before it is signed by
the cheque signers.
Are supporting documents stamped
“cancelled” by the cheque signers?
Cheque is passed to the cheque signers together with
the supporting documents
Are cheques mailed directly by the person
signing the cheque and not returned to the
preparers?
It is returned to the preparers to write in the cash book
and post the cheque to the supplier

AUDIT PROGRAMME
TRADE RECEIVABLES
Name of Client Sheridan AV
Year-end March 31,2015
Name of Auditor (s) Bonite, Stephani Cris V.
Millora, Beth Rachel Mae M.
Perez, Rose Mae T.
Plaza, Eloiza A.
Rebuyon, Aira A.
Ruaya, Ailyn C.
Villa, Mae Anelie O.
Trade receivables are shown as current assets. If genuine, they are owed by real people or real
organizations. They come into existence as a result of the sale of goods or the performance of
services by the company on credit.
Substantive testing should be carried out at year end on the Statement of Financial Position to gain
evidence regarding the following assertions:
 Presentation and disclosure
 Accuracy classification and valuation
 Rights and Obligations
 Completeness and cut off
 Existence or Occurrence
The following substantive tests were carried out on the trade receivables showing on the Statement of
Financial Position (see attached)
Audit
Assertion
Audit objective Test(s) to be carried out Details of testing Date and
signature
Presentation
and
Disclosure
Trade receivables
are properly
identified and
classified in the
financial
statements
Appropriate
disclosures have
been made about
debts that have
been factored or
otherwise
assigned
Perform analytical
procedures:
Calculate ratios
Analyse ratio results
Accounts receivable turn over.
A ratio of average accounts receivable
for a period divided by net credit sales
for the same period.
Step 1: BEG. ACCOUNTS Receivable +
ENDING Accounts Receivable.
Step 2: net credit sales / accounts
receivable = accounts receivable turn
over.
+ 465,407
672, 371
1,137,778
=1 ,137,778/ 2

Check opening balances to
previous years accounts to
ensure properly brought
forward
Obtain the aged list of
balances
Check a sample to
underlying records.
Test the list adds up.
Agree the list to the control
account and to the financial
statements
Is there an allowance for
bad debts showing in the
financial statements?
Determine appropriateness
of any disclosures relating
to trade payables
= 568,889
2019
465,407
568,889
= 0.82%
2020
672, 371
568,889
= 1.18%
It simply means that Sheridan AV has a
high accounts receivable turnover in
2020 of 1.18%.
The ratio indicates that Sheridan AV
has an idea of how efficient it collects
on debts owed or collects on credits
they have provide their customers.
The balances in previous years is
clearly and properly forwarded in
opening of accounts.
All accounts in 31 march 2020 are been
recorded appropriately.
It is a little bit confusing as to digits
presented, but when I examine and
analyse deeply, the digits presented is
appropriately correct and it is an
advantage to the company per se
because the Trade receivables are
presented according to its origin of
accounts.
No allowance for bad debts has been
recorded in given financial statements
of Sheridan
2020 2109
T/R 627,471 428,627
Other debtor 16,400 16,400
Prepayments 28,500 20,360
total 627, 371 465,07
09/12/2020

Accuracy,
classification
and valuation
Rights and
Obligations
Receivables at
the Statement of
Financial Position
date represent
legal claims of the
entity on
customers for
payment
The provision for
bad debts
represents a
reasonable
estimate of the
difference
between gross
receivables and
their net
realisable value
Vouch a sample of trade
receivables to supporting
documentation as follows:
Vouch from list of trade
receivables to suppliers
invoices, goods dispatch
notes and sales invoices or
other supporting
documentation to ensure
recorded at correct amount
owed.
Bad and doubtful debts –
1.Obtain a listing that
breaks down the bad debt
provision by debtor
2. Obtain a list of debts with
balances
-over 3 months old
-in excess of their credit
limit
-in hands of liquidators or
receivers
Compare lists under 1 and
2 above to consider
adequacy of bad debt
provision. Obtain
explanations for any
material items that may
have been omitted from
bad debt provision
Obtain a list of receivables
written off during year to
ensure they were
authorised and write off
was valid
Based on the information of transaction
and events of Sheridan . The VAT is
misstated and wrong calculation to get
the correct amount of VAT. On the
other hand, I saw a wrong presentation
of sales invoice number in the sales
retail.
No bad debts has been recorded in the
year 2020 and 2019.
No document has been provided in
this. No bad record for bad debts.
09/12/2020
Completeness
and Cut off
Trade receivables
include all claims
on customers at
the Statement of
Financial Position
date
Perform cut off tests for
sales and sales returns
1. Select a sample of
recorded sales transactions
from several days before
and after year-end, and
examine supporting sales
invoices and dispatch notes
to determine that sales
were recorded in the proper
period
2. Select a sample of credit
memos issued after year-
end, examine supporting
documentation such as
dated goods received
notes, and determine that
the returns were recorded
in the proper period.
On the sales transaction and events ,
some of the sales invoices are not
properly recorded that it should be. So
it resulted to difficulty of determining
the correct sales.
There is no problem in terms of dates
and the sheet are properly recorded.
09/12/2020
Existence or
Occurrence
Receivables
balances
Perform a trade receivables
circularisation (see
Recorded accounts, cash receipts and
cash payments exists and it pertains to

represent
amounts owed by
customers at the
Statement of
Financial Position
date
instructions on
supplementary sheet page
4)
Where circularisation has
not been carried out or
unsatisfactory results
obtained carry out
alternative procedures (see
instructions on
supplementary sheet page
4)
the entity.
09/12/2020
Signed
Auditor,
STEPHANI CRIS V. BONITE
BETH RACHEL MAE M. MILLORA
ROSE MAE T. PEREZ
ELOIZA A. PLAZA
AIRA A. REBUYON
AILYN C. RUAYA
MAE ANELIE O. VILLA

RECEIVABLE
CHOSEN
AMOUNT LETTER SENT REPLY RECEIVED COMMENTS
Tempohead Ltd £92,436 10 April 2021 3 May 2021 Wrong presentation has
been observed. It should be
march 22,2021 where the
payment is already made but
unfortunately it was recorded
march 28 in cash receipts.
Livyng DIY
Wholesaler ltd
£21,840 10 April 2021 29 April 2021 The amount was correctly
stated.
Innershine
Wholesaler Ltd
£35,300 10 April 2021 . 15 May 2021 Same problem encountered
from Tempohead Ltd .
Wrong presentation has
been observed. It should be
march 29,2021 where the
payment is already made but
however it was recorded
April 3 in cash receipts.
Zen AV
Wholesaler
£300,500 10 April 2021 13 May 2021 The amount was correctly
stated.
Bristol Audio Ltd £40,000 10 April 2021 NO REPLY
RECEIVED
Follow up is needed
Procedures to carry out if a trade receivables circularisation is not carried out or unsatisfactory results
have been obtained.
receivable chosen amount letter sent reply received comments
Bristol Audio Ltd £40,000 April 10, 2021 No reply Follow up
The remaining balance of Bristol Audio is in the bad debts accounts of the company and still
uncollectible accounts.

AUDIT PROGRAMME
NON-CURRENT ASSETS
Year-end December 31,2021
Perez, Rose Mae T.
Plaza, Eloiza A.
Rebuyon, Aira A.
Ruaya, Ailyn C.
Non-current assets are assets that are held for longer than one year for use in the entity‟s operations.
The following substantive tests were carried out on the non-current assets showing on the Statement of
Financial Position (see attached)
Audit Assertion Audit objective Test(s) to be carried out Details of testing Date and
signature
Presentation and
Disclosure
Non current assets
are properly
identified and
classified in the
financial statements
Disclosures
regarding cost or
valuation,
depreciation
methods and useful
lives are adequate
Perform analytical
procedures:
Calculate ratios
previous years accounts to
forward
Check figures per the list of
non-current assets to the
financial statements to
ensure assets have been
extracted correctly
Enquire into assets useful
lives/residual values to
ensure depreciation is
appropriate
The balances listed on the list
of non-current assets have the
same amount listed on the
notes to the financial
statements with the exception
of the costs.
The presentation of other
details is not correctly
organized and there is a lack of
information clearly relating to
the sheet control number and
the date of printing.
There is a lack of knowledge on
the appropriateness of the
disclosures submitted directly to
the depreciation report issued.
Due to lack of control number
and other details, it may take a
lot of time to verify the figures

Compare statement
presentation with applicable
accounting standards to
determine that non current
assets are properly
identified and classified in
Determine appropriateness
of disclosures relating to
cost, value and depreciation
methods and useful lives of
assets
provided on the depreciation
report.
Accuracy,
classification and
valuation
Rights and
Obligations
Non current assets
are stated at cost or
valuation less
accumulated
deprecation
The entity owns or
has rights to the non
current assets at
Statement of
Financial Position
date
Check a sample of additions
to freehold land and
buildings to completion
statements to verify amount
paid/date of acquisition
Check a sample of
additions to plant and
equipment to invoices to
verify cost, nature
(classification)_ of the item
and date of acquisition
Re-perform calculation of
profit/loss on disposal and
agree sales proceeds to
cash records to ensure
calculated correctly
Sample check disposals to
documents supporting
disposal – VAT invoices,
agreements,
correspondence, minutes
etc for authorisation.
Re-perform depreciation
calculations to ensure
correctly calculated and in
accordance with company
policy
Base on the reviewed sample of
additions to land and buildings,
the statements have been
verified and the amounts and
items presented are properly
written with no errors.
Based on the sample of plant
and equipment additions
checked, there are no known
errors.
The sums are right and
correctly presented when
recalculating profit / loss on
disposal and deciding to sell
cash proceeds.
The depreciation estimates are
determined accurately and in
line with company policy
Completeness
and Cut off
Non current asset
balances include all
applicable assets
used in operations
at the Statement of
Financial Position
date
Check nature of the items
capitalised to ensure only
items of a capital nature
included in non current
assets by reviewing repairs
and maintenance account
Trace a sample of non
current assets to list of non
current assets to ensure all
assets included
Review minutes for
evidence of disposals to
ensure that authorised
dispsoals have been
In nature, all goods in the repair
and maintenance accounts are
all non-current properties.
All approved disposals have
been reported on the basis of
the analysis of the minutes of
proof of disposal.

recorded
Existence or
Occurrence
Recorded non
current assets
represent productive
assets that are in
use at the
Statement of
Financial Position
date
Physical existence of assets
to ensure
1. Existence and in working
condition
2. stage of completion in
respect of assets in course
of construction
Non-current assets are in good
working condition that are not
specified in the repairs and
maintenance.
From the audit work carried out, we believed that, in my view, non-current assets are reasonably
reported (* according to the matters highlighted below).
Signed
ROSE MAE T. PEREZ
ELOIZA A. PLAZA
AIRA A. REBUYON
AILYN C. RUAYA
MAE ANELIE O. VILLA
Auditor

Excerpt from Sheridan Audio Visual Limited
Statement of Financial Position
Note 1 - NON CURRENT ASSETS
Property F&F Plant and
Machinery
Computer
Equipment
Total
Cost b/fwd 1,225,000 290,000 560,686 87,500 2,163,186
Additions 750,000 165,000 26,400 941,400
Disposals (54,500) (54,500)
Cost c/fwd 1,975,000 455,000 506,186 113,900 3,050,086
Depreciation
b/fwd
361,225 139,125 335,171 76,965 912,486
Charge for year 39,500 47,381 53,627 19,247 159,755
Elimination on
disposal
(43,494) (43,494)
Depreciation
c/fwd
400,725 186,506 345,304 96,212 1,028,747
Net Book Value at
end of period
1,574,275 268,494 160,882 17,688 2,021,339
Net book value at
beginning of
period
863,775 150,875 225,515 10,535 1,250,700
Depreciation rate
2% cost 15% RB 25% RB 33% Cost

AUDIT PROGRAMME
TRADE PAYABLES
Year-end 31 March 2021
Perez, Rose Mae T.
Plaza, Eloiza A.
Rebuyon, Aira A.
Ruaya, Ailyn C.
Trade payables are the amounts the company owes its suppliers for the provision of goods and
services. Trade payables are shown as current liabilities. . Substantive testing should be
carried out at year end on the Statement of Financial Position to gain evidence regarding the
following assertions:
The following substantive tests were carried out on the trade payables showing on the
Statement of Financial Position (see attached)
Audit
Assertion
Audit
objective
Test(s) to be carried
out
Details of testing Date
and
signatu
re
Presentation
and
Disclosure
Trade payables
are properly
identified and
classified in the
financial
statements
Disclosures
relating to trade
payables are
adequate
Perform analytical
procedures:
Calculate ratios
Check opening
balances to previous
years accounts to
ensure properly
brought forward
It indicates that the
company‟s payable ratio
is equal to 1.84 after
measuring the ratio.
This implies that the
business has plenty of
cash available to pay its
loans out of the current
asset within one year or
to pay off its short-term
debt in a timely manner.
9,17,2x

Obtain a list of trade
payables balances.
Check a sample to
underlying records.
Test the list adds up.
Agree the list to the
control account and
to the financial
statements
Compare statement
presentation with
applicable accounting
standards to
determine that trade
payables are properly
identified and
classified in financial
statements
Determine
appropriateness of
any disclosures
relating to trade
payables
Accuracy,
classification
and valuation
Rights and
Obligations
Trade payables
are stated at
correct amount
owed
Trade payables
are liabilities of
the entity at the
date of the
Statement of
Financial
Position
Vouch a sample of
trade payables to
supporting
documentation as
follows:
Vouch from list of
trade payables to
suppliers‟ invoices,
goods received notes
and purchase orders
or other supporting
documentation to
ensure recorded at
correct amount owed.
It is noticed that the
trade payables are
reported at the correct
amount owed after
confirming the correct
steps.
It is stated that the
liabilities borne by the
Company at the date of
the financial position
Statement are trade
payables or monetary
obligations.
9,17,2x
Completenes
s and Cut off
Trade payables
include all
amounts owed
Perform a search for
unrecorded liabilities
by:
After all trade payables
have been checked, it is
known that all trade
9,17,2x

by the entity to
suppliers of
goods and
services at the
Statement of
Financial
Position date
All trade
payables are
recorded in the
correct
accounting
period
Analytical review
Discussion with
management on
steps they have taken
to ascertain all
liabilities recorded
Select a sample of
recorded purchase
transactions from
several days before
and after year-end
and examine
supporting suppliers
invoices and goods
received notes to
determine that
purchases were
recorded in the
correct period
Observe the number
of the last goods
received note issued
on the last business
day of the audit
period and trace a
sample of lower and
higher numbered
goods received notes
to related purchase
documents to
determine whether
transactions were
recorded in the
proper period
Identify any amounts
on ageing report that
are overdue their
invoiced terms and
investigate any
reasons with
Sheridan AV. Enquire
if there are any late
payment charges.
payables and other
supporting
documentation are
correctly registered. This
ensures that in the
proper accounting
period, the transactions
and creditors balances
are reported properly
and accurately.

Existence or
Occurrence
Recorded trade
payables
represent
amount owed
by the entity at
the date of the
financial
statements
Perform a payables
circularisation if
necessary (see
attached sheet)
After the amounts of the
sales invoices and the
debtors‟ subsidiary
ledgers have been
checked and compared,
it is known that the
amount reported by
Rama Home in the
ledger does not equate
to or equal to the
amount reported in the
invoice. Therefore,
unless the amount
reported is inaccurate or
in dispute, the auditor
must conduct a payable
circularization or
negative circulation.
9,17,2x
From the audit work carried out we confirmed that there are misstatement and incorrect amount
presented of the trade payables. Please examine the presented data below and compare them
to your records. Thus, in my view, the trade payables are not reasonably specified.
Signed
ROSE MAE T.PEREZ
ELOIZA A. PLAZA
AIRA A. REBUYON
AILYN C. RUAYA
MAE ANELIE O. VILLA
Auditor

September 17, 202x
Sheridan AV
This request is sent to you to allow our independent auditors to confirm that our record is
accurate.
This is to inform you that on the Rama Home Sales Invoice, our records on February 05, 2021
showed a sum of ⁇ 156,720.00.If this record is the same with your records on that date please
confirm by signing and returning this form directly to our auditors. For this aim, an addressed
envelope is enclosed.If you notice any discrepancy with the space given below, please report
the information directly to our auditor!
Yours Faithfully,
Stephani Cris V. Bonite
Beth Rachel Mae M. Millora
Rose Mae T. Perez
Eloiza A. Plaza
Aira A. Rebuyon
Ailyn C. Ruaya
Mae Anelie O. Villa
********
Surigao City
The above amount is correct/ incorrect for the following reasons ________.
Yours Faithfully,
________________
Sheridan AV

HOW TO CARRY OUT A TRADE PAYABLES CIRCULARISATION
1 Select a sample of accounts for confirmation from a complete list of suppliers
2 Confirm with client the payables you wish to circularise. Obtain explanations where
the client does not want you to circularise.
3 Send the confirmation requests. Enclose a prepaid envelope for return to the firm.
Ensure that the reply part of the letter is properly referenced.
4 Record replies on a control sheet
5 Where replies are not received within a reasonable period send a follow-up letter
6 Follow alternative procedures for any accounts which have an unfavourable
response or for which no response has been obtained.
7 Summarise the results and consider whether audit evidence has been obtained for
trade payables.

AUDIT PROGRAMME
INVENTORY
Year-end March 31, 2021
Perez, Rose Mae T.
Plaza, Eloiza A.
Rebuyon, Aira A.
Ruaya, Ailyn C.
INVENTORY
Inventory is shown as a current asset on the Statement of Financial Position. It is valued at the lower of
cost or net realisable value. Inventory can be shown as goods bought for resale (merchandising company)
or in one of three stages for a manufacturing company:
 Raw materials
 Work in process
 Finished goods
The following substantive tests were carried out on the inventory showing on the Statement of Financial
Position (see attached)

signature
Presentation and
Disclosure
Inventory is properly
identified and
classified in the
Disclosures
pertaining to the
classification, basis
of valuation and the
pledging of
inventories are
adequate
Trace opening inventory
records to prior year‟s
working papers
Perform analytical review
and review industry
experience and trends.
Examine an analysis of
inventory turnover and
gross profit
Compare report
accounting standards
Review disclosures for
inventories in drafts of
financial statements and
determine conformity with
applicable accounting
standards.
Stock records of rough
materials, finished product,
store room and the shop and
show room exhibited the
misguided stock code course of
action. Base on the stock
assessment of rough materials,
there are other included stocks
which are not recorded in either
the stockroom or the store
room. On the stock get-together
of finished items, stock codes
are not properly planned and
the unit counts are exceptional
corresponding to the full scale
number of remembers for the
recorded finished product in
both stockroom and store room.
Also, the reports on the hurt
stock reports are assessed
base on its salvage regard.
It would be astute if during the
stock check printed, costs of
every thing and the complete
expense of every thing are
likewise expressed in the report
so during the assessment it
would be significantly simpler.
09/12/2020
Accuracy,
classification and
valuation
Rights and
Obligations
Inventories are
properly stated at
the lower of cost or
net realisable value,
determined in
accordance with
applicable
accounting
standards
Actual – agree prices to
purchase invoices on
costing records
Selling price less mark up –
(a) agree a selection of
items to current price lists
and also prices noted at the
inventory attendance and
(b) consider whether the
gross margin used to
reduce selling price to cost
is reasonable and has been
correctly applied
Perform a lower of cost or
net realisable value test
(see supplementary sheet)
On the important sheet, the
exactness of the stock check is
better than anticipated due to
the stock count official which is
in like manner the scattering
overseer of the dissemination
community. In regards with this,
the count may wind up being
less reliable in view of the
relationship of the count official
with the stockroom and store
room.
09/12/2020
Completeness
and Cut off
Inventories include
all materials,
products and
supplies at the
Statement of
Financial Position
date
CUT OFF
Review the results of the
test on cut-off carried out on
receivables and payables
and ensure that they
provide adequate assurance
as to the accuracy of the
year end cut-off
Enquire if any inventory is
held on behalf of third
parties and ensure that such
items are excluded from
inventory. Where material,
obtain confirmation from the
third party.
Where inventory is held by
third parties on behalf of the
company, obtain certificates
where amounts are
material.
Base on the cut off did on the
receivables and payables, the
stock count gave good
assertion to the accuracy of the
year end cut-off
There is no such stock hung for
the outcasts.
09/12/2020

Existence or
Occurrence
Inventories included
in the Statement of
Financial Position
physically exist
Complete the inventory
attendance programme (see
supplementary sheet)
Trace all items selected at
the inventory count to the
final inventory sheets.
Obtain explanations for any
differences
The stock interest program is
done and completed base on
the reinforcing sheet.
Inventories with thing code that
starts with X0 in unrefined
materials are suspected to be
things left in the creation room
which are work in measure.
Since the creation has been
closed since Walk 30,2021.
Stock things that have codes
starting from E11, F02, G03,
H01 (except for H019), J007,
and K02 are suspected to be
passed on yet not yet settled
totally which are recorded in the
stock array of finished product.
09/12/2020
From the audit work carried out I confirm that (*subject to the matters highlighted below) in my opinion,
inventories are fairly stated.
Signed
ROSE MAE T. PEREZ
ELOIZA A. PLAZA
AIRA A. REBUYON
AILYN C. RUAYA
MAE ANELIEO. VILLA
AUDITOR

SUPPLEMENTARY SHEET
LOWER OR COST OR NET REALISABLE VALUE TEST
For items priced at net realisable value, the auditors must verify the basis for arriving at that value(it should
be actual selling price less an estimate of costs to be incurred in completion and selling)
IAS 2 identifies the following situations when a write-down may be necessary: a fall in selling prices;
physical deterioration of inventories; obsolescence; a decision to sell at a loss or purchasing or production
errors.
TESTS THAT CAN BE CARRIED OUT
1. Review sales after date of Statement of Financial Position
2. Observe for signs of obsolescence during attendance at inventory count
3. Analyse amount of inventory held in relation to budgeted turnover to identify any excessive
holdings.
4. Enquire of management and of sales and production personnel
5. Review minutes of boards of directors and executive committees

Client Sheridan AV___________________________________________________
Year End December 31,2021_____________________________________________
AUDIT PROGRAMME – INVENTORY COUNT ATTENDANCE
NOTES INITIALS AND DATE
GENERAL
1 Record the following details for each location
visited:
(a) location(s) being counted
(b) date(s) of count and attendance
(c) types of inventory held at location
(d) approximate value of inventory by category
and location
(e) Details of any inventory at locations not
covered by the count and any alternative
method used to verify their existence
(f) brief description of the procedures adopted
(g) names of client staff counting
(h) names of audit staff taking part
(a) Distribution center zones 1 to 7, Creation
territory and Store room
(b) Walk 31,2021,
Subside Fillion - stockroom chief/dispersion
supervisor
Ransack Cole – Stockroom/dispersion
collaborator
Dan Sheppard – Retail Shop right hand
(c) Crude materials and completed products
(d) Crude materials Distribution center
66,309
Crude materials Store Room – 19,989.20
Completed Products Distribution center –
258,064
Completed Products Store Room and Demo
Room –
9,192
(e) Inventories with thing code that begins
with X0 in crude materials are suspected to
be things left in the creation room which are
work in measure. Since the creation has
been shut since Walk 30,2021.
Stock things that have codes beginning from
E11, F02, G03, H01 (with the exception of
H019), J007, and K02 are suspected to be
conveyed however not yet settled
completely which are recorded in the stock
examination of completed products.
(f) Physical tallying of stock which requires
an including official to perform such
undertakings.
(g) Diminish Fillion - stockroom
director/circulation chief
Loot Cole – Stockroom/dispersion associate
Dan Sheppard – Retail Shop colleague
(h) Graeme Moore
Stephani Cris V. Bonite
09/12/2020
2 Ascertain and note whether:
(a) the inventory count teams were properly
briefed prior to commencing the count;
(b) the teams only include people who are not
responsible for the storing and recording of
inventory and work in progress;
(c) inventory was counted by teams of two (one
counting and one checking and recording);
(d) the teams were asked to identify damaged,
slow moving or obsolete stock;
(e) the teams were made aware of inventory
(a) It is dictated by Graeme Moore base on
the video gave
(b) the gatherings are made out of the
appropriation place chief, stockroom
accomplice, and retail shop partner which
are liable for taking care of and recording of
stock
(c) the gatherings on both the dispersion
community and the store room and demo
09/12/2020

held on behalf of third parties and these were
excluded from the count
room are done by both one including and
one checking and recording
(d) Yes
(e) Yes
INVENTORY COUNTING
3 Determine whether:
(a) the teams were counting and recording
accurately
(b) the counts were being controlled to ensure
that all inventory was counted and only once;
(c) there was adequate control over inventory
sheets to ensure that they are all accounted for
(e.g. pre-numbered)
4 Where serially numbered sheets are used,
record the numbers of all sheets used at the
end of the count
3. (an) all groups in both stockroom and
store room are checking and are recording
precisely.
(b) yes
(c) yes
4. There were no sequential numbers
introduced on the numbered sheets.
09/12/2020
5 Select a sample of items from completed
inventory sheets and check to ensure that the
number has been recorded properly
A020 Sheridan Nexus NX-01 – 5.1 speaker
set, have various amounts checked and
introduced on the stock examination.
X034 Kevlar speaker cone – tweeter, are
not seen during the stock check and isn't
recorded yet is recorded on the stock
gathering in crude materials
09/12/2020
6 Count a sample of inventory items and
ensure that they have been recorded properly
on the final inventory sheets
A020 Sheridan Nexus NX-01 – 5.1 speaker
set, have various amounts checked and
introduced on the stock gathering.
09/12/2020
7 Where possible, copy or extract details of a
sample of rough inventory sheets for checking
at the final audit
Given already 09/12/2020
8 Ascertain whether any inventory is held on
behalf of a third party. Where applicable
ensure that it has been properly labelled and
excluded from the count
As indicated by the video given by Graeme
Moore, it is said there that there is no
outsider stock hung on the distribution
centers and store room.
09/12/2020
9 Note any old or damaged inventory during the
count. Ensure that it is marked as such on the
final inventory sheets.
Done 09/12/2020
CUT OFF
10 Ensure that no movements in or out took
place during the inventory count
11 Record details of the last goods dispatch
number and the last goods received note
number to follow up at the final audit.
10. The shop was shut a day prior to the
stock tally and the shop resumes after the
day of the stock tally.
11. D123 Phoenix – PBR-25 – Blu-beam
player, February 29, 2021
09/12/2020
CONCLUSION
12 Write a report on the inventory count
concluding on its accuracy and the ability to be
able to rely on it.
12.Base on the exactness of the stock
check done on March 31,2021, it had been
done with authentic counting and the
principle issue is that the one accounted to
count the stock is just the scattering boss or
partners. This may wind up being less
trustworthy sort of checking as a result of
the affiliations of the scattering chief to the
inventory itself.
09/12/2021

Payroll Controls
Expected payroll controls Are these in existence at Sheridan?
All changes to the payroll are authorised:
 Starters
 Leavers
 Rate of pay changes
 Rate of tax changes
Yes, the association endorsed all of these changes. It is the
record/overseer boss who's in control for this authorisation.
Change tracking
Copies are kept of changes to the payroll – such
as rate changes
Indeed, consistently pay rates are talked about in the
gathering with the Top managerial staff. Furthermore, if any
pay raise were affirmed it is recorded in the minutes. The
moment demonstrates that the pay raise has been approved
by the board. A duplicate of the moment is given to Rosie
Hendricks, the record/administrator chief. At that point,
Rosie requests that Jay Alexander correct the pace of pay in
the finance framework.
Error-checking reports
Show items that fall outside of normal payroll
Yes, the Bookkeeper and Administrator director is the
person who plays out this activity.
Access restricted to payroll records
Appropriate measures taken to protect payroll
data and personal details with restricted access to
online and paper based records including
payslips.
With respect to the affirmation of the money data and
individual nuances on the online access, the association
recently practiced extra measures by using 'strong'
passwords, indiscriminately made, using at any rate 12
characters: upper and lower case letters, numbers and
pictures. Moreover, likewise, at customary spans, the
system by and by anticipates that them should change their
subjectively delivered passwords. However, concerning the
paper based records, for instance, payslips the constraint
with its passage isn't ensured about since it is put on
laborers' compartments arranged on the typical kitchen
domain in building 1 in which everyone can get to. In
addition, the payslips contains singular information that
should be reliant upon insurance.
Separation of duties
 One person prepares payroll and another
authorises it
 Another person makes payments
Yes, Indeed, there are three (3) approved people associated
with finance measures. Rosie Hendricks, the Records and
Administrator Chief; Jay Alexander, the Finance Executive;
James Clark, the Fund Chief.
Automated timekeeping systems
Computerised time clock of calculating weekly pay
and overtime
No, for the worker on week , they should finish a timesheet
demonstrating the hours worked each day. The time sheet is
pre-printed, and the representative is the person who fill in
the subtleties by hand – recording when they sign in and
out. The worker likewise figures sums for quite a long time
for quite a long time and the week – and fills these on the
sheet. While for the various staff that are paid month to
month. They're paid a yearly compensation which doesn't
fluctuate as indicated by hours worked.
Calculation verification
For any manual calculations to the payroll
For the week after week paid worker, since they're the who
fill in their timesheets the line director is the person who's in
control in checking the records before sending it for the
finance handling.
Hours worked/overtime authorised for weekly pay Sheridan AV doesn't pay additional time for staff on
compensations except if there are exceptional
circumstances. James Clark, the fund chief approves the
installment, If there is an extra time installment. It is gone
into the framework by Jay Alexander, the finance head.
Bank transfers to employees are authorised by
James Clark, the Finance Director who's a senior individual

two senior members of staff from the staff that approved the bank move to
representatives.
Payroll checking account – this should be a
separate account to minimise risk of fraud
The Organization don't have fund money related records.
Imprint Avon, the Cashbook in control gets through the bank
move posting for salaried staff. When Imprint has gotten
through the bank move postings for week by week or
salaried staff, money is electronically moved to the laborers'
own one of a kind record.

AUDIT PROGRAMME
CASH
Year-end March 31, 2021
Perez, Rose Mae T.
Plaza, Eloiza A.
Rebuyon,Aira A.
Ruaya, Ailyn C.
Cash relates to the monetary assets held by a company. Substantive testing should be carried out at year
end on the Statement of Financial Position to gain evidence regarding the following assertions:
The following substantive tests were carried out on the cash showing on the Statement of Financial
Position:
signature
Presentation and
Disclosure
Monetary assets are
properly identified
and classified in the
financial statements.
Perform analytical
procedures:
Calculate ratios
previous years‟ accounts to
forward.
Check figures per the cash
book to the financial
statements to ensure
amounts have been
extracted correctly.
Compare statement
accounting standards to
determine that monetary
assets are properly
identified and classified in
financial statements.
In the wake of figuring
proportions it shows that the
organization's money proportion
is equivalent to 0.53. It implies
that the organization have less
money and money reciprocals
than the current liabilities. It
implies that the organization
utilized its benefit well to gain
benefits however low money
proportion mirrors a quick issue
with reimbursing its risk.
09/12/2020
Accuracy,
classification and
valuation
Monetary assets are
recorded at the
correct balance at
the Statement of
Financial Position
date.
Request a bank
confirmation letter from the
bank(s) of which the client
holds account(s), obtaining
authorisation from the client
where not already held.
Re-perform the period end
bank reconciliation checking
it has been prepared
correctly.
Subsequent to taking the right
allots It is discovered that the
book balance on the bank
compromise don't coordinate
the specific figure introduced in
the books.
In the wake of playing out
another bank compromise it is
resolved that the bank
compromise isn't appropriately
done.
09/12/2020
Rights and
Obligations
The entity owns or
has rights to the
monetary assets at
Statement of
Check that the bank
confirmation letter states the
monetary amount held by
the client to confirm
It is affirmed by the bank that
the organization possesses the
money related resources at
Explanation of budgetary
09/12/2020

Financial Position
date.
ownership. Position.
Completeness
and Cut off
The cash balance
per the Statement of
Financial Position
date includes all
monetary assets
owned.
Check that the bank
confirmation letter does not
list any additional accounts
that have not been recorded
by the client.
In view of the affirmation letter
introduced by the bank doesn't
list any extra records that have
not been recorded by the
customer.
09/12/2020
Existence or
Occurrence
The monetary
assets recorded in
the Statement of
Financial Position
date exist.
Check that the bank confirm
letter confirms the correct
balance in the account(s).
Confirm the existence of
any material reconciling
items within the bank
reconciliation (e.g. count
cash if a large amount is
held outside of bank).
The bank compromise don't
affirms the right equalization of
the record.
It is likewise discovered that a
lot of money is held outside of
the bank.
09/12/2020
From the audit work carried out we confirmed that there are not adequate measure of records to test the right
portrayal of the money anyway it is discovered that there are errors and the measure of money isn't accommodated
on the right sum introduced in the book as I would like to think, money isn't genuinely expressed.
Signed
ROSE MAE T. PEREZ
ELOIZA A. PLAZA
AIRA A. REBUYON
AILYN C. RUAYA
MAE ANELIE O. VILLA
Auditor

Midterm Output - AUDIT SIMULATION - GROUP 7

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