Pacific co
Trade Payable:
1 Review the purchase invoice and confirm it with the grn to ensure the completeness of the trade
recivable balance
2 Review the post and pre year purchased invoices and trace it with the grn to confirm there are no
late cutt off errors
3 Review the post year end bank statement and cash book to confirm any payment have been made
to the suppliers to confirm there existence
4 Analyze the current year trade payable balance and confirm it with prior year to identify any
significant fluctuation and disccuss the reason for it .
5 Analyze the current year trade payable collection period and and confirm it with prior year to
payable collection period to identify is there any cashflow problem
6 Recalculate the trade payable balance by reviewing the post and pre year end balance to confirm
the errors are rectified and it is accurate
Provision for Legal Claim
1 Review the Fs to confirm that the provision recogized is with in accoradance to ias 37
2 obtain a written representation letter from the management that the provision is estimated
completely and accurately
3 analyze the underlying assumption taken by management to estimate $0.5 to assess it
reasonableness
4 review the post year bank statement or cash book to confirm any payments has been made to the
customer related to the provision
5 Correspond with the management the controls put in place to safeguard the wrong labelling of
product in future
6 correspond with the co lawyer to assess the probability of lossing the case or whether the provision
amount is estimated correctly
Revenue
Review the pre and post year end Sales invoice and confirm it with GDN to confirm there is no late
cutt off error
The revenue has been increased by 10% as compared to prior year which is significant the auditor
perform analytical procedures to confirm its accuracy
Recalculate the revenue to confirm the claim related to faulty product is not included in sales to
confirm it accuracy
Analyze the breakdown sales on the product basis for the current and prior year to investigate any
unusual fluctuation and disscuss with management the reason for it
Analyze the gp margin of current year with prior year to investigate any significant fluctuation and
disscuss with management the reason for it
Analyze the sale invoice for confirming that price on the sales invoice agree with price list and
customer master file data
Q. Discuss the issue
The audit team has gathered the evidence which is around 0.8m rather then 0.5m which the
management has recogozed as the provison in f.s which is understated by 0.3m which is not materila
to the financial statement the auditor should obtain a written representation from the management
that the provision recognized is accurate and complete
Issue remain unresolved
If the issue remain unresolved and no amendment had been made the auditor will issue a modified
Latte co
Trade Recievable
1. Analyze the increase in trade receivable by 16% as compared to prior year to investigate the
significant fluctuation and confirm the reasonableness of it.
2. Analyze the decrease in allowance of receivable by 33% as compared to prior year where inspect
the receivable has been increased and assess the reasonableness of the underlying assumption taken
by management.
3. Obtain a breakdown of the receivable balance to identify the significant customer and confirm it
with pre and post year end cashbook and bank statement to ensure whether the payment has been
made by the customer to confirm there existence
4. Obtain a written representation from the management that the allowance of recievable recognized
is complete and accurate
5. Review age analysis to confirm any customer outstanding balance and invoice and trace it against
allowance to confirm the realistic of allowance of recievable
6. Review the sales invoice and confirm it with GDN to ensure the recivable balance is valued
accurately
Provision for legal claim
1. Correspond with the former employee of latte co to understand the likelyhood of claim been
settled.
2. Correspond with the co lawyer to confirm whether the claim is probable or possible and follow
through the case
3. Correspond with the company directors the underlying assumption taken to recognized the
provision of 0.25m when the actual claim is greater then it to assess it reasonableness
4. Review that the provision is created accordance to the criteria of IAS 37 in the financial statement.
5. Seek a written representation from the director that the provision estimated by the management is
accurate and complete
6. Review the post year end bank statement to confirm whether any payment has been made against
the claim.
Bank loan
1. Review the loan agreement to confirm the duration of the loan or whether any asset has been
deposit as a security or is there any fine related to late payment
2. Review the financial statement to confirm that the loan is classified between the non current and
current liabilities
3. Obtain a breakdown on the expense to confirm that the finance charge is been included and trace it
with the post year end bank statement to ensure the payment has been made against it
4. Review the bank statement to confirm the accuracy of the loan repayment been made
5. Correspond with the management the reason for the due payment of laon to confirm is the
company facing any cashflow or liquidity issue