Computer auditing and the use of the computer - summary (стр. 2 )

v  generate report to give evidence of obsolete stock by looking for items that :

have a quantity on hand but the date of last receipt was more then 12 months ago have a quantity on hand but where the last date of sale is more then 6 months ago

then physically inspect the items to establish if they are obsolete / damaged

and follow up differences with management

GAS substantive procedures for existence of asset (BS) – use audit software to :

v  print exception report of any duplicated asset codes

v  select sample of asset for physical inspection and compare it to description / documents

v  extract list of additions in current year and compare with supporting docs and verify to physical asset

v  extract sample list of assets and compare to insurance docs to ensure they are covered (i. e. exist)

v  cast the asset category schedule or the whole asset register and agree the balance to the GL

v  search the disposal date field for any disposals before or after current financial year (shouldn’t be any)

v  extract an exception report for any “errors :

blank / missing fields duplicated asset details e. g. engine numbers or licence details existence / negative book values valuation current depreciation that is higher then cost

v  cast the net book value for all assets and agree to amount in the GL

and follow up differences with management

Remember if asked to verify existence then NOT value just that they exist!! Read the question to see what they want to know about assets!!

If doing depreciation then – use audit software to :

v  reperform the deprec calc for each asset in each category and then agree to the total of the current year’s depreciation field

v  perform brief analytical review of depreciation allowance e. pare to prior year by total and category of asset.

and follow up differences with management

GAS substantive procedures for Trade Receivables (debtors) (BS) – use audit software to :

v  extract the opening balances of trade receivables for the current year and trade receivables closing balance for the previous year and print a report of the exceptions

v  compare closing balance in trade receivables ledger with the responses received from the confirmations of trade receivables and print a report of the exceptions

v  recalc the closing balance of trade receivables and compare to the closing balance in the masterfile (take opening balance plus sales less payments received less trade discount must equal closing balance)

v  extract and print total of trade receivables masterfile and trade receivables control account in the GL

v  extract list of credit closing balances in the trade receivables ledger and examine the source docs to establish why there are credit balances, or inspect the journal where it is reclassified as a liability in the financials

v  scan the trade receivables masterfile for “error” conditions like :

duplicated account numbers blank fields missing invoice numbers (using sequence test on invoice numbers) figures in the amount columns, but nothing in the name or details blocks

v  extract sample of trade receivables at year-end and also list of payments from masterfile after year-end and compare with the source documents to confirm is before year-end and that the trade receivables do exist at year-end

v  extract a list of debtors who have a hold on their account or who have exceeded their credit limits to access if the amounts are deemed to be recoverable

v  perform analytical review of the credit losses account i. e. ;

comparison to prior years comparison to aging to prior year (has there been a change to the credit policy) calculation of ratios e. g. allowance as a percent of sales, days outstanding debtors and comparison to prior years)

v  identify new account holders buy comparing debtors for this year-end and the last year-end and then trace the debtors to the credit applications to substantiate their existence.

and follow up differences with management

GAS substantive procedures for Trade Payables / creditors (BS) – use audit software to :

v  extract the opening balances of trade payables in the current year and compare it to the closing balance of the previous year and print an exception report

v  compare a list of creditors at the current year-end with a list of creditors at the end of the previous year end to identify creditors where were on the previous list and aren’t on this one and creditor’s balances that are a lot smaller then they were in the previous year

v  extract and print total of the list of trade payables in the masterfile and compare to the trade payables control account in the GL

v  reperform casts f the creditor’s control account

v  recalc the closing balance of trade payables and compare it to the closing balance in the masterfile (opening balance at beginning of year, add purchases during the year, less payments made, less trade discount received and compare to closing balance in masterfile)

v  extract list of debit closing balances in trade payables ledger and examine the source docs to establish why they exist and then inspect the journal where they are reclassified as an asset in the financials

v  scan the trade payables masterfile for error conditions like :

blank fields missing account numbers duplicate creditors names / account numbers amounts above a certain limit

v  extract a sample of payments after year-end and compare with the source invoices to confirm that it is before year-end and that the trade payables were raised in the current year

v  extract sample of purchase invoices before year-end and compare with relevant supplier delivery note to confirm that purchases do exist and they are in the GL

v  use analytical procedures on creditor’s balance and follow up on material fluctuations like :

comparison of aging current year to prior year current year purchases and creditors to each other and prior years

v  reperform the cross cast (days outstanding) on the masterfile

and follow up differences with management

GAS substantive procedures purchases (BS) – use audit software to :

v  extract a sample of purchase invoices and inspect that they are made out to the entity and that the items purchases appear on the entity’s inventory list and aren’t fictitious

v  extract a sample of purchase invoices and inspect bank statements to confirm that payment for the goods was made to the correct supplier and for the correct amounts

v  find the last GRN for the year and then search for any GRN number that is higher then that that has been processed (shouldn’t be any)

v  extract and compare all the payments made to suppliers to the purchases in the GL

v  use transaction date in the masterfile to extract a sample of purchase invoices before year-end and trace them to the supporting docs to confirm that they were received in the current period

v  recalc the total purchases by multiplying the purchase price by the quantity received (excluding vat) and subtract the discount received and then compare with the value in the purchases amount field

v  compare the total purchases amount in the masterfile with the balance in the GL

v  print exception report indicating negative values in price or quantity purchase fields and follow up with management

v  multiply the purchase price with the quantity purchased and multiply the product by 14% to give the expected vat amount – compare this to the vat field

v  for interest changed on each trade payable balance multiply the amount owed by the interest rate and compare the interest charged field

v  compare all credits in the trade payables account to each debit entry in the purchase account to confirm that all purchases have been recorded in the proper account

v  extract a sample of purchase invoices by inspecting the description of the goods purchases by comparing it to the inventory list and trace it to the inventory account in the GL

and follow up differences with management

Audit objective “to obtain satisfaction that ….”

DBMS assists auditor in audit procedures by :

·  generating test data

·  providing an audit trail

·  inspecting the integrity of the database

·  obtaining other necessary info for the audit

·  providing access to the database for use of audit software.

Controls for occurrence and authorisation (validity) of EFT’s :

·  EFT should be limited to 1 terminal

·  multi-level passwords (2 or more) for senior staff to authorise transfers

·  bank must identify the terminal as authorised when EFT’s are processed (dial back etc)

·  terminal should switch off after 3 unsuccessful attempts to do EFT

·  should use 1-time passwords (e. g. if exceeds certain limit)

·  security breaches must be logged and followed up by management

·  controls over telephone lines where data is transmitted (dial-back)

·  division of duties

·  all EFT transfers should be recorded through a suspense account

·  limited to certain days / times

·  bank should acknowledge EFT’s and request confirmation before the money is transferred

·  must have audit trail of each EFT transaction – must be reviewed by management and reconciled

·  regular bank recons should be prepared.

Factors for direct connection to internet :

·  relatively expensive connection, but very fast and reliable