For the purposes of this assignment, you are to imagine that you work as Audit Manager for a company called Amazing Accountants. Your new audit client is a listed company Abacus Property Group. The client has asked you to perform their financial report audit for the financial year ended 31 December 2020.

Design FIVE (5) substantive procedures for the transactions and balances discussed for high level detective internal controls of the company such as the following chosen ones below and justify why you select these substantive procedures for BOTH of the following scenarios:

1. Your proposed tests of controls in question (3) PASSED.
2. Your proposed tests of controls in question (3) FAILED.

1.Regular Reconciliation Of Transactions

Reconciliation is stated as a contrast of many sets of data. It recognises and scrutinises differences and takes corrective action when needed.Firstly comparing budget to actual expenses and investigate differences. Doing regular on the spot transactions, records and reconciliation to make sure that expectations are matched to timeliness, completeness and segregation of duties.

To get the most reliable evidence, conduct a re-performance of a sample of bank reconciliation. Finalised bank reconciliationcan be inspected for verification of identification of mistakes and follow up. The lease reliable evidence derives from observing client staff do a bank reconciliation.

Test control:Sales and Account receivable

Sales

1.Commonly numbered sales invoices, authorisation for purchase order exceeding a stated limit and authorisation over receivables change are included in the internal controls over the sales cycle.

2.The auditor chooses a sample of transaction in no order and examines the corresponding purchase orders, invoices and customer statements

3.The auditor checks all order of numbers and all numbers are backed up and accounted for.

Account receivable

1.Accounts receivables begins with the first customer invoice, this is to control and reduce issues that will rise during the creation of accounts receivable before having an extensive set of controls

2.Controls then comprise of proper continuation of accounts receivable, and their termination through either payment from customers or the generation of credit memos

2.Inventories

Abacus property group inventory Sale of inventory in 2020 is $15, 418. Inventoryshows the number of properties that are currently marked active on the market.A listed property by the seller is counted as inventory.Inventoryis evaluated by calculating the total number of active listings on the final day of the month. This must be recorded monthly so that a current balance is always known

Purchase and Payable

Purchase and payable ledger should be reviewed together because both are independent to each other. Fraud done through purchase return and payable accounts reduce and cash embezzlement by the authorised person but these transactions not actual happen but shown on the books of accounts. Go through each invoice and such purchased should be authorised. Take balance confirmation to the vendors time to time and if any discrepancy notice in such review than confirm to authorised person in the organisation.

Purchase

1.Purchasing function must be carried out according to management's guidelines and policies

2.Purchasing is carried out in an effective, efficient, and economical way

3.Purchasing function aids as a protection for the best interest of the company in obtaining the best quality of service at the lowest price

Account payable

1.Specifically designed to aid in mitigating loss risk in the accounts payable function

2.Payable controls are categorised into three categories such as the obligation to pay, installing the payable database into the system and lastly paying suppliers

Test of Control

1.Verify the samples of purchase order and ensure that it is authorised by appropriate senior manager

2.Review the amount in the invoice and ensure it is balanced correct

Inventory and Cost of goods sold

Inventory should be check interval basis by the management. Inventory count check by the management compared with inventory count done by the auditor. In case of, cost of good sold, check whether calculations should be done according to cost accounting policies and check with these cost accounting reports. In case of any discrepancy found then it should be reported to the top management.

Test Of Controls:

1.Implement authorisation for adjustment to inventory amendments

2.Implement authorisation for cancelling or writing off of inventories

3.Check reconciliation of inventory counts to inventory records

4.Check and inspect order of dispatch and goods received notes for completeness