ACCA F8 - Audit and Assurance Revision Kit 2016

(a)
Procedures to obtain audit evidence and examples relevant to auditing purchases and other expenses
Inspection
This is the examination of documents and records, both internal and external, in paper, electronic or other
forms.
In the audit of purchases the auditor may inspect a sample of purchase invoices to ensure they agree to the
amount posted to the general ledger.
Observation
This involves watching a procedure or process being performed.
An auditor may observe the checking of goods received against purchase orders in the goods received
department.
Inquiry
This involves seeking financial or non-financial information from client staff or external sources.
An auditor may discuss with management whether there have been any changes in the key suppliers used
and compare this to the purchase ledger to assess completeness and accuracy of purchases.
Recalculation
This consists of checking the mathematical accuracy of documents or records and can be performed
through the use of IT.
The auditor may recalculate accruals and prepayments to gain evidence that other expenses are not over or
understated.
Reperformance
This is the auditor's independent execution of procedures or controls that were originally performed as part
of the entity's internal control.
The auditor may re-perform the payables ledger control account reconciliation to ensure it has been properly
carried out.
Analytical procedures
This is evaluating and comparing financial and/or non-financial data for plausible relationships. Also include
the investigation of identified fluctuations and relationships that are inconsistent with other relevant
information or deviate significantly from predicted amounts.
The auditor could review expenses on a monthly basis to identify significant fluctuations and discuss them
with management.
(Note: You may have come up with other valid examples relevant to purchases and expenses.)
Answers 159