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Tutorial solution – Auditing liabilities, capital and directors emoluments - KH
Concepts In Biochemistry And Microbiology (SHGB6115 )
Universiti Malaya
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Tutorial solution – Auditing payables, capital and directors emoluments Question 1 – Greenwich Bakery Ltd Trade Creditors/Payables Obtain a listing of trade payables from the purchase ledger and agree to the general ledger and the financial statements. Ensure payables are included in financial statements as current liabilities. Reconcile the total of purchase ledger accounts with the purchase ledger control account, and cast the list of balances and the purchase ledger control account. Review the list of trade payables and accruals against prior years to identify any significant omissions (i. big suppliers that no longer have balances owed). Perform post year end cash testing by reviewing after year end payments, if they relate to the current year then follow through to the purchase ledger or accrual listing. Review invoices received after the year end to ensure no further items need to be accrued. For a sample of trade payables balances, obtain supplier statements and reconcile these to the purchase ledger balances, and investigate any reconciling items. Enquire of management their process for identifying goods received but not invoiced or logged in the purchase ledger and ensure that it is reasonable. Select a sample of goods received notes before the year end and follow through to inclusion in the year end payables balance. Calculate the trade payable days and compare to prior years, investigate any significant differences. Select a sample of payable balances and perform a trade payables’ circularisation, follow up any non replies and any reconciling items between balance confirmed and trade payables’ balance. Review the purchase ledger for any debit balances, for any significant amounts discuss with management and consider reclassification as current assets. Accruals Obtain the list of accruals from the client, cast it to confirm mathematical accuracy and agree to the general ledger and the financial statements. Review the detailed breakdown of accruals and compare to prior year to identify any obvious omissions. Ensure sundry accruals are included in financial statements as current liabilities. Recalculate a sample of accrued costs by reference to contracts and payment schedules (e. loan interest). Perform post year end cash testing by reviewing after year end payments, if they relate to the current year then follow through to the purchase ledger or accrual listing. Review invoices received after the year end to ensure no further items need to be accrued.
Provisions Enquire with the directors or inspect relevant supporting documentation to confirm that a present obligation exists at the year end. Inspect relevant board minutes to ascertain whether payment is probable. If applicable, enquire with the client's solicitors about the likely outcome and chances of payment. Obtain a breakdown of the items to be provided for and cast it. Recalculate the provision and agree components of the calculation to supporting documentation. Review the post year end period to identify whether any payments have been made, compare actual payments to the amounts provided to assess whether the provision is reasonable. Obtain a written representation from management to confirm the completeness of the provision. Review the disclosure of the provision to ensure compliance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets.
Tutorial solution – Auditing liabilities, capital and directors emoluments - KH
Course: Concepts In Biochemistry And Microbiology (SHGB6115 )
University: Universiti Malaya
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