ttRevenue

- Compare the level of revenue against prior year and the budget to investigate any
significant fluctuation. (completeness)
- Obtain a schedule of sales for the year broken down into main categories,
Compare with the prior year breakdown and Discuss with management for any
unusual movements. (Accuracy and Completeness)
- Calculate the gross profit margin of the client and Compare it to the prior year to
investigate any significant fluctuation. (A)
- Select a sample of sale invoice, Recalculate the invoice total including discounts
and sales tax to ensure its accuracy. (A)
- Select a sample of GDNs for both pre and post year end, Review these and sales
invoices to ensure that those have been recorded in correct accounting period
and its cut-off has been correctly applied. (Cut-off)
- Select a sample of credit notes raised, Trace through this to the original invoice to
ensure the invoice has correctly removed/ written off from the sales. (A)
Inventory
Valuation:
- Examine the post-year end credit notes to determine whether there are any goods
that could signify that a written down is required
- Discuss with the management the basis of WIP valuation to assess its
reasonableness
- Agree the cost of good sold to supporting documentation to confirm the raw
material cost, labour cost and any overheads attributed to the cost.
- Review the aged inventory reports to identify any slow-moving goods,
Discuss with the management why these have NOT been written off and if any
allowance is required.
- For the debatch of product, Review board minutes and Discuss with the
management their plans for selling these goods and WHY they believe these goods
have a NRV of……
- If any products have been sold post year-end, Review the sales invoices to assess
NRV
- Inspect the monthly broad meeting minutes from ….. onward to obtain further
information regarding the faulty paint and its possible resale value ( Faulty
inventory)
Trade receivables
Valuation:
 - Review the aged receivable report (listing) to identify any slow-moving balances
Discuss with credit controller about those balances to assess whether customers
are likely to pay or any allowance is required
- Review the customer correspondence for slow-moving balance to assess if any
balances are in dispute or unlikely to paid (LASTA of K+)
- Discuss with finance director to assess whether the allowance for the
receivables is not increased & Review its overall adequacy.
- Obtain a breakdown of the opening allowance and Consider if any outstanding
receivables have been recovered to assess the reasonableness of the prior levels
of receivables.
- Review whether any after-date cash receipts for slow-moving/ old balances
receivable balances to assess the receivables and allowances’ accuracy.
- Calculate the potential level of trade receivables which are not recoverable and
assess whether this is material or not and discuss with management
- Review broad minutes to identify whether there are any significant concerns in
relation to payments by customers.
Allowance for receivables
- Discuss with finance director to assess whether not increasing the level of
allowance or not providing against any receivables & Review its overall
adequacy.
- Obtain the breakdown of opening balances of the allowance and consider if any
outstanding receivables have been recovered to assess the reasonableness of
prior levels of the allowances and any balances have fully written off.
- Inspect the receivable ledger to identify any slow moving or old balances and
discuss the status of these balances with credit controller to assess whether they
are likely to be recovered.
- Review customer correspondence to identify any balances which are in dispute or
are unlikely to be paid and confirm if these have been considered when
determining the allowance.
- Recalculate the potential level of trade receivables which are not recoverable and
compare the level of allowance
 Discuss the difference with management
- Review any after-date cash receipts to identify the slow-moving/old balances
Going concern
- Obtain the company’s cash flow forecast and review the cash in and cash
outflows. Assume the assumption for reasonableness and discuss the findings with
management to understand if the company will have sufficient cash flows.
 - Perform a sensitivity analysis on the cash flows to understand the margin of
safety the company has in terms of its net cash in/outflow.
- Evaluate management’s plans for future actions, including their contingency plans
in relation to ongoing financing and plans for generating revenue, and
consider the feasibility of these plans.
- Review the company’s post year-end sales and order book to assess if the levels
of trade are likely to increase and if the revenue figures in the cash flow
forecast are reasonable
- Review any bank correspondence to assess the likelihood of the bank renewing
the overdraft facility
- Review post year-end correspondence with suppliers to identify if any have
threatened legal action or any others have the overdraft.
- Enquire of the lawyers of the client as to the existence of any litigation
- Obtain written representation to confirm the directors’ view that the client is a going
concern.

Legal claim
- Review the customer correspondence to establish the details of the claims and the
amount being claimed.
- Discuss with the client’s lawyer to assess the likelihood of potential future claims.
- Review the post year end payments for the damage settlements and compare with
any amounts provided at the year end to assess the reasonableness of the provision
- Compare levels of returns and claims to date against sales volumes of the product
to assess the potential level of future claims.
- Obtain written representations from management that there have been no other
contamination incidents and no other product liability claims of which
management are aware and for which provision may be required.
- Review the draft financial statements to verify that the legal claims have been
appropriately provided for or disclosed in compliance with the IAS 37
Redundancy provision
- Recalculate the redundancy provision to confirm its completeness and Agree the
component of the cost to supporting documentation, such as employee contract.
- Obtain a breakdown of the redundancy provision calculated by employee,
Recalculate it to ensure its COMPLETENESS and agree it to the trial balance
- Review a written representation from management to confirm the
COMPLETENESS of the provision.
- Review the disclosure in the financial statement of redundancy provision to verify
it in accordance with the IAS 37
 - If announced BEFORE year end, Review the supporting documentation to verify
the decision is formally announced.
- Review the broad minutes to ascertain whether it probable that the redundancy
payment is likely to be paid.
Purchase and other expense
- Calculate the gross profit and operating profit margin and Compare them to the
last year and budget to investigate any significant fluctuation.
- Review the monthly purchase and other expenses to identify any significant
fluctuation, Discuss with management
- Recalculate the prepayment and accrual charged at the year end to ensure the
accuracy of the expense charge included in SOPL
- Select a sample of GRN from throughout the year, Agree to purchase invoice and
purchase day book, purchase order to assess the completeness of the purchases.
- Select a sample pre and post- year end GRN, Review through it with the purchase
invoice and purchase day book to ensure whether it is recorded in the correct
accounting period. (cut off)
- Select a sample a post year end expense invoice to ensure that any expense
relating to the year is included. (Cut off)
Payroll expense
- Cast a sample of payroll record to confirm the completeness and accuracy
Agree to the total wages and salaries expense per the payroll system to the trial
balance
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