Page 134 - Microsoft Word - 00 IWB ACCA F7.docx

Chapter 8 3 4

Example (ii): Audit objective: Test the accuracy of purchases

Good procedure Badly worded procedure

For a sample of purchase invoices listed Inspect a sample of invoices for
in the purchase day book, agree the accuracy.
amount on the invoice to the purchase
day book to ensure it is recorded
accurately.

Explanation

The good procedure above clearly states: The badly worded procedure is not
sufficiently described:
 from where the sample should be
chosen - purchase day book  From which population should the
sample be selected?
 how they should be checked –
agree the amounts in the PDB and  What information on the invoice
invoice should be inspected?

 the objective of the test – accuracy

Example (iii): Audit objective: Test the completeness of trade payables

Good procedure Badly worded procedure

Calculate the payables days ratio and Perform analytical procedures over
compare with prior year to identify any payables.
unusual variation that could indicate over
or understatement. Discuss any
significant variation with management.

Explanation

The good procedure above clearly states: The badly worded procedure is not
sufficiently described:
 the type of analytical procedure to
be performed – payables days ratio  What type of analytical procedure
should be performed?
 what it should be compared against
to make sense of the figure – prior  How should it be performed?
year ratio

 the objective of the test – to identify
unusual variations that could
indicate misstatement that need to
be discussed with management

130