Part Ten Other Audit

Structure of Seminar 1. Cash 2. Bank 3. Non-current assets 4. Non-current liabilities

1. Cash 1)Audit objectives for cash The following table demonstrates the audit objectives for cash balances and how these are related to the financial statement assertions relevant to this account area. The audit procedures described in the remainder of this chapter are undertaken to provide audit evidence to support these financial statement assertions.

Cash 2) Planning the cash count Planning is an essential element, as it is important that all cash balances are counted at the same time as far as possible. Cash in this context may include unbanked cheques received, IOUs and credit card slips, in addition to notes and coins. Planning decisions will need to be recorded on the current audit file including: — The precise time of the count(s) and location(s) — The names of the audit staff conducting the counts

Cash —The names of the client staff intending to be present at each location Where a location is not visited it may be appropriate to obtain a letter from the client confirming the balance. 3) Cash count The following matters apply to the count itself. — All cash/petty cash books should be written up to date in ink (or other permanent form) at the time of the count.

Cash — All balances must be counted at the same time. — All negotiable securities must be available and counted at the time the cash balances are counted. — At no time should the auditors be left alone with the cash and negotiable securities. — All cash and securities counted must be recorded on working papers subsequently filed on the current audit file. Reconciliations should be prepared where applicable.

2. Bank 1) Bank confirmation procedures The audit of bank balances will need to cover completeness, existence, rights and obligations and valuation. All of these assertions can be audited directly by obtaining third party confirmations from the client's banks and reconciling these with the accounting records, having regard to cut-off. The audit objectives linking these assertions are as follows: — Recorded cash balances exist at the year-end (existence)

Bank — Recorded cash balances include the effects of all transactions that occurred (completeness) — Year-end transfers are recorded in the correct period (cut-off) — Recorded balances are realisable at the amounts stated (valuation and allocation) — The entity has legal title to all cash balances shown at the year-end (rights and obligations)

Bank 2) Confirmation requests The auditors should decide from which bank or banks to request confirmation, having regard to such matters as size of balance, volume of activity, degree of reliance on internal control, and materiality within the context of the financial statements. The auditors should determine which of the following approaches is the most appropriate in seeking confirmation of balances or other information from the bank:

Bank — Listing balances and other information, and requesting confirmation of their accuracy and completeness, or — Requesting details of balances and other information, which can then be compared with the requesting client's records 3)Audit plan for bank

3. Non-current assets Key areas when testing non-current assets are: Confirmation of ownership Inspection of non-current assets Valuation by third parties Adequacy of depreciation rates 1) Audit objectives for tangible non-current assets

Non-current assets 2)Internal control considerations — The non-current asset register is a very important aspect of the internal control system. It enables assets to be identified, and comparisons between the general ledger, non-current asset register and the assets themselves provide evidence that the assets are completely recorded. — Another significant control is procedures over acquisitions and disposals, that acquisitions are properly authorised, disposals are authorised and proceeds accounted for.

Non-current assets — Security arrangements over non-current assets are sufficient. — Non-current assets are maintained properly. — Depreciation is reviewed every year. — All income is collected from income-yielding assets. 3) Audit procedures for tangible non-current assets (1) completeness (2) existence

Non-current assets (3) valuation (4) right and obligations (5) additions (6) self-constructed asserts (7) disposals (8) classification and understandablity

4. Non-current liabilities Non-current liabilities are usually authorised by the board and should be well documented. 1) Auditors will primarily try and determine: — Completeness: whether all non-current liabilities have been disclosed — Accuracy: whether interest payable has been calculated correctly and included in the correct accounting period — Classification and understandability: whether long- term loans and interest have been correctly disclosed in the financial statements

2) Audit plan