返回列表 发帖

每日一练F8 (UK) 答案回复可见

3 (a) With reference to ISA (UK and Ireland) 520 Analytical procedures explain
(i) what is meant by the term ‘analytical procedures’; (2 marks)
(ii) the different types of analytical procedures available to the auditor; and (3 marks)
(iii) the situations in the audit where analytical procedures can be used. (3 marks)
Zak Ltd sells garden sheds and furniture from 15 retail outlets. Sales are made to individuals, with income being in
the form of cash and debit cards. All items purchased are delivered to the customer using Zak’s own delivery vans;
most sheds are too big for individuals to transport in their cars. The directors of Zak indicate that the company has
had a difficult year, but are pleased to present some acceptable results to the members.
The profit and loss account for the last two financial years are shown below:
Profit and loss account
31 March 2008 31 March 2007
£000 £000
Turnover 7,482 6,364
Cost of sales (3,520) (4,253)
–––––– ––––––
Gross profit 3,962 2,111
Operating expenses
Administration (1,235) (1,320)
Selling and distribution (981) (689)
Interest payable (101) (105)
Investment income 145 –
–––––– ––––––
Profit/(loss) before tax 1,790 (3)
–––––––––––– ––––––––––––
Balance sheet extract
–––––– ––––––
Cash and bank 253 (950)
–––––––––––– ––––––––––––
Required:
(b) As part of your risk assessment procedures for Zak Ltd, identify and provide a possible explanation for
unusual changes in the profit and loss account. (9 marks)
(c) Confirmation of the end of year bank balances is an important audit procedure.
Required:
Explain the procedures necessary to obtain a bank confirmation letter from Zak Ltd’s bank. (3 marks)
(20 marks)

3 (a) (i) Explanation of analytical procedures
Analytical procedures are used in obtaining an understanding of an entity and its environment and in the overall review
at the end of the audit.
‘Analytical procedures’ actually means the evaluation of financial and other information, and the review of plausible
relationships in that information. The review also includes identifying fluctuations and relationships that do not appear
consistent with other relevant information or results.
(ii) Types of analytical procedures
Analytical procedures can be used as:
– Comparison of comparable information to prior periods to identify unusual changes or fluctuations in amounts.
– Comparison of actual or anticipated results of the entity with budgets and/or forecasts, or the expectations of the
auditor in order to determine the potential accuracy of those results.
– Comparison to industry information either for the industry as a whole or by comparison to entities of similar size
to the client to determine whether debtor days, for example, are reasonable.
(iii) Use of analytical procedures
Risk assessment procedures
Analytical procedures are used at the beginning of the audit to help the auditor obtain an understanding of the entity
and assess the risk of material misstatement. Audit procedures can then be directed to these ‘risky’ areas.
Analytical procedures as substantive procedures
Analytical procedures can be used as substantive procedures in determining the risk of material misstatement at the
assertion level during work on the profit and loss account and balance sheet.
Analytical procedures in the overall review at the end of the audit
Analytical procedures help the auditor at the end of the audit in forming an overall conclusion as to whether the financial
statements as a whole are consistent with the auditor’s understanding of the entity.
(b) Net profit
Overall, Zak’s result has changed from a net loss to a net profit. Given that sales have only increased by 17% and that
expenses, at least administration expenses, appear low, then there is the possibility that expenditure may be understated.
Sales – increase 17%
According to the directors, Zak has had a ‘difficult year’. Reasons for the increase in sales income must be ascertained as the
change does not conform to the directors’ comments. It is possible that the industry as a whole, has been growing allowing
Zak to produce this good result.
Cost of sales – fall 17%
A fall in cost of sales is unusual given that sales have increased significantly. This may have been caused by an incorrect
inventory valuation and the use of different (cheaper) suppliers which may cause problems with faulty goods in the next year.
Gross profit (GP) – increase 88%
This is a significant increase with the GP% changing from 33% last year to 53% in 2008. Identifying reasons for this change
will need to focus initially on the change in sales and cost of sales.
Administration – fall 6%
A fall is unusual given that sales are increasing and so an increase in administration to support those sales would be expected.
Expenditure may be understated, or there has been a decrease in the number of administration staff.
Selling and distribution – increase 42%
This increase does not appear to be in line with the increase in sales – selling and distribution would be expected to increase
in line with sales. There may be a mis-allocation of expenses from administration or the age of Zak’s delivery vans is
increasing resulting in additional service costs.
Interest payable – small fall
Given that Zak has a considerable cash surplus this year, continuing to pay interest is surprising. The amount may be
overstated – reasons for lack of fall in interest payment e.g. loans that cannot be repaid early, must be determined.
Investment income – new this year
This is expected given cash surplus on the year, although the amount is still very high indicating possible errors in the amount
or other income generating assets not disclosed on the balance sheet extract.

(c) Obtaining a bank letter
– Review the need to obtain a bank letter from the information obtained from the preliminary risk assessment of Zak.
– Prepare a standard bank letter in the format agreed with banks in your jurisdiction.
– Obtain authorisation on that letter from a director of Zak for the bank to disclose information to the auditor.
– Where Zak has provided their bank with a standing authority to disclose information to the auditors, refer to this authority
in the bank letter.
– The auditor sends the letter directly to Zak’s bank with a request to send the reply directly back to the auditors.

THANKS

TOP

谢谢

TOP

thanks

TOP

thanks

学习一下

TOP

answer

TOP

thank you

 

maybe someday i will provide some questions and the answers.

TOP

3q

TOP

1

TOP

answer

TOP

返回列表