Substantive audit procedure
In order to verify the validity of the inventory figures,
our firm would be able to scrutinize every sector of Delicious Truffles
Limited. The following is the procedure for auditing of the company:-
Analysis of the
company’s human resource
The auditors would have to check all the documents in the
human resource department. This includes checking their salary levels, their
allowances, their area of specialization and also their tax payment records.
The team of auditors would have to verify the payments made to the human
resource personnel by cross checking the cash receipts and bank deposits issued
to them.
Moreover, the contracts issued for the delivery of services
to the company would have to be reviewed and checked to ensure full cooperation
by the contractors. In some cases, interviews would be made and the human
resource management expected to explain the occurrence of some misinformation
in the records.
Analysis of the
production department
The records in the manufacturing department would be
reviewed by the team of auditors. This includes retrieval of both manual
records and automated production records stored in the manufacturing systems of
the company. The machines production capacity would be analyzed and compared to
its level of operation for the last financial year. In addition, the amount of
raw materials utilized would be analyzed in comparison to the documented output
of the company.
Analysis of the sales
and marketing department
Auditors would be able to check the documents on the methods
of sales and marketing of the company. This would include the amounts of cash
used for advertisements, promotions, and also the allowances given to the
employees. The provision of receipts and other approved documentation would help
to verify the expenditures by the sales and marketing department.
Analysis of the
transportation department
The transport department would have to provide records of
their supply locations and the quantities supplied for a given period of time.
These documents should be approved by the management and also the customer
receiving the goods. In addition, details about the number of employees and
their payment rates would be confirmed with those from the human resource
management.
Analysis of the
public relations methods
The auditors would have to check the methods used by the
company to maintain good public relations. The effectiveness of these methods
would be analyzed and the total costs of these methods calculated. The public
relations department would have to provide the documents about the cash amounts
allocated to them and their general expenses.
Checking the
company’s capital investments and other investments
Documentation about all the company’s assets must be
provided to the team of auditors. These include their physical locations, their
age, their original costs etc. The auditors would check on the depreciation and
appreciation rates of the assets and come up with a total value of the assets.
Also, the value of capital assets owned in partnerships would have to be
provided separately.
Moreover, the auditors would check on the income generated
from other investments from the company. These investments may include renting
of property, use of company property by individuals on a temporary basis etc.
The records of such income generating activities should be availed to the
auditors for authentication.
Analysis of legal
payments
The company would have to provide the documents verifying
their payments to the government for taxes and other operational taxes. These would be done by checking the tax
records from the government website.
Analysis of
miscellaneous costs
During a company’s day to day operation, various expenses
with low monetary value emerge. Though small, the company should be able to
keep a record of the small details in a miscellaneous file which should be
availed to the auditors. The auditors would then be able to check every detail
in the miscellaneous expenses and note any form of anomaly.
Analysis of the
finance department
After collection of data from all other departments, the
team of auditors would wind up their job in the finance department. The clerks
in this department would have to provide all inventory details for the given
period of time. In this regard, the auditors would embark on cross- referencing
the details collected in all the departments and those of the inventory records
hence they would be able to detect any form of anomaly in the records.
Conclusion
In order for the audit of Delicious Truffles Limited to be a
success, the assessments of the audit have to be made. Our firm would have to
determine the information it would seek during the audit such as the production
levels, management procedures, company policy etc. In the planning and risk
assessment phase, the firm would be able to check on the possibility of flaws
in the company by analyzing their operational mechanisms. Finally, the team of
auditors would be able to analyze every department records in the company and
the cross reference the inventory records with the data collected. This would
therefore help to identify the departments with malpractices in the company.
No comments:
Post a Comment