Lim, John Christoffer R.

IA10305 Aud Com

Audit Procedures for Cash:

Hereunder is a useful audit program for auditing Cash Receipts Transactions and Cash Balances: Audit Objective: To determine whether cash balances at month-end/year-end are valid and actually exist. Analytical Procedures: 1. Compare cash accounts with those of prior years and investigate additions or deletions of accounts; 2. Compare cash receipts from miscellaneous sources with those of prior year and account for major changes. Other Procedures: 3. Count and list cash on hand at year-end and trace to cash receipts record and bank statement. 4. Vouch significant cash receipts from sources other than customers and trace to deposit slips and bank statements on a test basis. 5. Confirm bank balances directly with bank and BTr. Compare replies and investigate differences, if any. 6. Reconcile bank accounts as of year-end. 7. Obtain cutoff bank statement(s) directly from banks and trace reconciling items from bank reconciliation to cut-off statement. 8. Inquire as to status of inactive bank accounts. 9. Review GL account balances and trace postings from the underlying receipts and supporting documents to the reports and journals. 10. Prepare/obtain schedule of collections and deposits per bank account as of monthend/year-end. 11. Compare schedule with SL accounts. Examine the schedule footings and compare totals with the GL. 12. Review/verify bank reconciliation statements.

13. Note differences between bank and book balances and verify whether reconciling items are properly recorded in the books of accounts. 14. Prepare draft AO and discuss with management officials concerned before issuance.

Audit Procedures for Inventories:

Here is an audit program for inventories which is very useful for auditors: Audit Objectives: To ascertain the physical existence of the items appearing in the balance sheet and to be satisfied of the reasonable accuracy of quantities To ascertain whether all recorded procurements and utilization occurred during the current year. To test whether the inventories are properly valued using the moving average method of costing. Analytical Procedure: Compare inventory balances to anticipated need as well as to last years inventory balances. Test of details of transactions: 1. Vouch entries in inventory accounts to supporting documentation (e.g. invoices, requisition and issue slips, etc.) 2. Trace data from purchases, supply card, subsidiary ledgers to inventory accounts. 3. See if the asset method of accounting is applied. 4. Test cut-off of purchases and issuances. Test of details of balances: 5. Observe agencys physical count and verify inventory quantities: review the clients inventory instructions, if any, Determine whether the procedures outlined will result in reasonably accurate inventory. - Observe the inventory-taking and make sufficient test counts to determine whether inventory instructions are carried out, counts are accurate and properly recorded, and quality and condition of goods are considered - Obtain proper cut-off - Note existence of obsolete, slow-moving or damaged goods - Test check extension and footings of Inventory List

- Check against Memorandum Receipts - Assist in the inventory-taking personally or by representative - Conduct inquiry/personal observation to satisfy oneself as to effectiveness of methods of inventory-taking and as to reliability of clients representations - Prepare reports as to results of inventory-taking observed Obtain copy of final inventory lists, trace test of inventory quantities - compare final inventory list with the inventory balances appearing in the Supplies Ledger cards maintained by the Accounting Division as well as the inventory balances indicated in the stock cards of the Supply Office. Note down differences. 6. Verify inventory valuation-test check basis of prices from purchase orders/delivery receipts. See whether ending balances were arrived at using the moving average method of valuation. Reconcile inventory report balances with balances appearing in the balance sheet

Audit Procedures for Accounts Receivable:

Audit Objective: To establish the validity and collectability of the receivables and the fairness of the description and classification of these receivables in the Balance Sheet Analytical Review: Compare last years Accounts Receivable with the current period receivables. Segregating them as to kind or nature of the receivable. Take note of significant increases/decreases. Know the causes of such significant differences. Test of Details of Balances and Transactions: 1. Obtain/prepare a schedule of receivables w/ the ff: name address balance of account age of account balance 2. Pay particular attention to Receivables in the nature of advances to employees

for traveling expenses. 3. Foot the schedule and trace totals to GL 4. Compare balances in SL and test accuracy of aging 5. Verify collections made after balance sheet date 6. Ascertain that AR represents valid claims against existing debtors 7. Determine validity of AR 8. Determine collectability of AR. 9. Confirm receivables -write positive or negative confirmation letter -jot down details and items that need to be clarified 10. For receivables in the nature of traveling advances, prepare demand letters for their liquidation in accordance with pertinent regulations. 11. Make an evaluation of results of work done 12. Prepare working paper and report Receivables are also important element in financial statements so it must be examined carefully by an auditor.

Audit Procedures for Accounts Payable:

Accounts Payable should also be properly taken care of to ensure that they actually exist. The audit program for payables are shown below: Audit Objectives: To determine that all existing liabilities are properly recorded and shown in the balance sheet To determine that all the recorded liabilities are existing liabilities of the agency as of balance sheet date To determine that payees are valid claimants To ascertain that transactions are duly approved and complete with supporting documents Test of details of transactions and balances: 1. Vouch recorded accounts payable transactions to supporting documentation. 2. Vouch credits to supporting vouchers, vendor invoices, receiving reports, and purchase

orders and other supporting information. 3. Vouch debits to cash disbursements or purchase returns memoranda. 4. Perform purchases cut-off test. Select sample of recorded purchase transactions from several days before and after year-end and examine supporting vouchers, invoices, etc. to determine that purchases were recorded in the proper period. Observe the number of the last receiving report issued on the last business day of the audit period and trace sample of lower- and higher-numbered receiving reports to related purchase documents and determine that transactions were recorded in the proper period. Perform cash disbursements cut-off. Observe the number of last check issued and trace to the accounting records to verify accuracy of cut-off, or trace dates of paid checks returned with year-end cut-off bank statements to dates recorded. Confirm accounts payable. On a sample basis, send confirmation requests to vendors with large balances. Investigate and reconcile differences. Determine that payables are properly identified and classified.