ACC311 Assignment 01 Fall 2020 Solution / Discussion Due Date: 27-11-2020
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ACC311 Fundamentals of Auditing Assignment 1 Fall 2020
Semester Fall 2020
Fundamentals of Auditing (ACC311)
Due Date: 27th November,2020 Total Marks: 10
Topic To Be Tested:
Financial Statements Audit & Requirements to Select Different Procedures
After going through this activity, the students would be able to understand:
What are different types of audit?
What is financial statements audit?
How it is different from other types of audit?
What sources of evidences and quantifiable information available to auditors for conducting financial statements audit?
How an auditor selects different procedures for performing financial statements audit?
Assume that you have recently joined an audit firm after completing your accounting degree and audit training. STC Traders - a local firm dealing in office supplies is one of the largest clients of your audit firm. To audit the accounts of STC for the financial year 20X0, you have been assigned this task.
A. How will you select different procedures to perform audit on financial statements of STC Traders? Give your answer in bulleted form. (1 x 7 = 7 Marks)
B. What quantifiable information and evidences which are readily available to you for performing audit on financial statements of STC Traders? (1+2 = 3 Marks)
ACC311 Assignment 1 Solution Fall 2020
How will you select different procedures to perform audit on financial statements of STC Traders?
Procedures to perform audit on financial statements:
As auditor one should follow basic principles and essential procedures together with related guidance as provided in International Standards on Auditing (ISAs).
The Procedures of Audit are as follows
Inspection is the most commonly used method. Under this, the auditor checks every transaction/ document against written steps, procedures to ensure accuracy.
Under this technique of audit, the auditor usually tries to observe others doing/ performing a particular process.
This procedure is applied to ensure the correctness of financial statements either from internal sources within the audited organization or from external sources.
Recalculation: Under this audit procedure, the auditor usually recalculates the checks information presented by the client. It is generally used in case of checking mathematical accuracy.
Using this procedure, the auditor re-perform the entire process is performed by the client to find out gaps, audit findings, etc.
Classification and understandability
Financial information is appropriately presented and disclosed, and disclosures are clearly expressed so as to make them understandable to the users
This assertion means that transactions and events and other matters that have been recorded actually took place – and relate to this organization.
What quantifiable information and evidence which are readily available to you for performing audit on financial statements of STC Traders?
An audit of financial statements is conducted to determine that the overall financial statements (the Quantifiable information being verified) are stated in accordance with the requirements of the applicable International Financial Reporting Standards (IFRSs) and the Companies Ordinance 1984.
Following quantifiable information and evidence can be used
Bank Accounts / Bank Statements
Payroll Records & Processing
Fixed Asset Register
Purchase invoices with goods received notes (GRN) and purchase orders.
Sale Receipts (Monthly Sales Tax, Withholding Tax Returns as applicable in Pakitan)
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