Exam (elaborations)
AUE3702 ASSIGNMENT 2 SEMESTER 1 OF 2022
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AUE3702 ASSIGNMENT 2 SEMESTER 1 OF 2022Question 1
Considerations and procedures to be adopted
Considerations
• The inventory figure of R1 750 000 is material but not pervasive, this means
that the omission or misstatement of the inventory opening balance will affect
the decision of the users of financial statements.
• There was no sufficient and appreciate evidence obtained on the opening
balance by the predecessor audit.
• Inventory disclosed as key audit matter.
• There were no modifications on the audit report.
Audit procedures
• Obtained signed management representation letter for all assertions for the
opening balance of inventory.
• Agree the general ledger with the trial balance.
• Recalculate and casting for mathematical accuracy.
• Determine whether the prior year closing balance for inventory have been
correctly brought forward to the current period by inspecting signed prior
financials.
• Reviewing the predecessor auditor’s working papers to obtain evidence
regarding the opening balances.
• Evaluating whether audit procedures performed in the current period provide
evidence relevant to the opening balance of inventory.
• Obtain sufficient appropriate audit evidence about whether the accounting
policy is consistency with the prior year.
• Evaluate whether the accounting policy is consistency with IAS 2.
• Inspect the financial statement to observe that the inventory is presented and
disclosed in line with ISA 2.
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