ACCA F8 - Audit and Assurance Revision Kit 2016

(i) Deficiency (ii) Implication (iii) Recommendation
The purchase orders
reviewed and
authorised by the
purchasing director are
aggregated by region.
Quality of goods is not
checked by sales
assistants, only
quantity.
Purchase invoices and
GRNs are manually
matched, which is time
consuming.
A purchase invoice is
not put on the system
until it is ready for
authorisation by the
purchasing director
The lack of detail does not
allow the purchasing director
to make an informed
assessment of the buying
policies and they may be
unsuitable for specific markets
within regions.
Poor quality clothes are
accepted and may not be
saleable (also inventory may
be temporarily overvalued).
The manual process of such a
high volume of documents is
prone to human error. Invalid
invoices may be processed as
a result.
The purchase ledger will not
have all invoices posted,
understating liabilities. Also
payables may be paid late.
A country by country review of orders should be
carried out by the purchasing director. Where
appropriate, discussions should take place between
the purchasing director and local purchasing
managers before authorisation of orders.
Goods should be checked on arrival for quantity
and quality prior to acceptance.
A purchasing system should be adopted which
allows for logging of GRNs against original
invoices, and then electronic/automatic matching of
invoices against GRNs. A regular review by the
purchasing clerk should then be focused on
unmatched items.
Invoices not matched should be filed separately, as
should those not posted. These should be reviewed
at period ends and accrued for to ensure
completeness of payables.
(c)
Substantive procedures for year-end trade payables
Obtain a trade payables purchase ledger listing and agree the total to the general ledger and the figure
for trade payables included in the financial statements.
Compare the list of trade payables with the previous year's to identify any potentially significant
omissions
Compare the payables turnover and payables days to the previous year and industry data
Reconcile a sample of payables balances with supplier statements and investigate differences which
could indicate a significant misstatement.
Review the cash book entries or the bank statements after the end of the year for payments which
could indicate the existence of unrecorded trade payables.
Top tips. Only five were needed for full marks, but other procedures include:
Reconcile the total of the purchase ledger accounts with the purchase ledger control account and
cast the list of balances and the control account.
Review after date invoices and credit notes for evidence of unrecorded liabilities
For a sample of pre year end goods received notes, ensure the related payables have recorded pre
year end (ie that cut off is appropriate).
Perform a trade payables circularisation for a sample of trade payable balances, following up nonreplies
and reconciling the balance on the trade payables listing with that shown on the supplier
response.
Review the purchase ledger for debit balances that require reclassification as assets.
Make sure that trade payables are classified as current liabilities in the financial statements.
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