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Substantive Procedures F8

The document outlines substantive procedures for auditing sales/revenue and inventory. For sales/revenue, the procedures include recalculating invoices and discounts, matching prices to lists, ensuring completeness by matching orders to invoices, checking cut-off by examining pre- and post-year-end goods dispatch notes, comparing gross profit margins and revenue to prior periods, and agreeing credit notes to invoices. For inventory, the pre-count procedures involve reviewing prior issues, new/high risk warehouses, location coverage, inventory count instructions, third party holdings, and needing expert help.

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Muhammad Mahmood
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176 views1 page

Substantive Procedures F8

The document outlines substantive procedures for auditing sales/revenue and inventory. For sales/revenue, the procedures include recalculating invoices and discounts, matching prices to lists, ensuring completeness by matching orders to invoices, checking cut-off by examining pre- and post-year-end goods dispatch notes, comparing gross profit margins and revenue to prior periods, and agreeing credit notes to invoices. For inventory, the pre-count procedures involve reviewing prior issues, new/high risk warehouses, location coverage, inventory count instructions, third party holdings, and needing expert help.

Uploaded by

Muhammad Mahmood
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Substantive Procedures:

Sales/Revenue:
1. Select the sample of invoices and recalculate them to see the accuracy, recalculate the
discounts to ensure the accuracy, and match the prices to the standard list to confirm
the accuracy.
2. Completeness: Select a sample of customer sales order and agree with it with the
dispatch note and to the invoices to the inclusion in the sales ledger to ensure the
completeness of the sales.
3. Cut-off: Take the last GDN of the year and note it down then immediately take the
samples of GDNs before & after that and make sure they are being treated in the correct
accounting period.
4. Analytical Procedures: Compare the gross profit margins for the company and compare
it with the previous years and investigate the significant fluctuations.
5. Analytical Procedure: Compare the overall revenue with the prior years and budgets and
investigate the significant fluctuations.
6. Select a sample for the credit notes raised and agree with them through the invoices
and ensure the invoices are correctly removed from the sales.
Inventory:
Auditors work before inventory count:
1. Review the previous year's files to identify whether there were any warehouses where
significant inventory issues arose.
2. Discuss with the management whether there are any new warehouses or have
experienced significant control issues.
3. Consider Location. Ensure all locations are covered or decide locations the audit team
will visit basing this upon the materiality and the risk to each site.
4. Obtain a copy of the proposed inventory count instruction and review them if any
deficiencies found then discuss them with the management before the counts begin.
5. Arrange to verify if any inventory is held by the 3rd party.
6. Establish if the expert’s help is needed.
7. You are
8.

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