501_2014_3_e-20140702.pdf - Tutorial letter SUBSTANTIVE...

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Tutorial letter 501/3/2014 SUBSTANTIVE PROCE- DURES AND FINALISING AN AUDIT AUE3702 Semesters 1 and 2 Department of Auditing
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© 2013 University of South Africa All rights reserved Printed and published by the University of South Africa Muckleneuk, Pretoria AUE3702/501/2014 70149747 InDesign A4_Icon_Style
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iii AUE3702/501 Contents Page Orientation and learning approach iv TOPIC 1: Audit evidence 1 Learning unit 1: The theory of audit evidence (ISA 500) 3 Learning unit 2: Relying on information produced by a management’s expert (ISA 500) 8 Learning unit 3: Using the work of an auditor’s expert (ISA 620) 11 Learning unit 4: Using the work of internal auditors (ISA 610) 14 Learning unit 5: Initial engagements: opening balances (ISA 510) 17 Learning unit 6: Accounting estimates including fair value accounting estimates, and related disclosures (ISA 540) 23 Learning unit 7: Audit sampling (ISA 530) 27 Learning unit 8: External con fi rmations (ISA 505) 31 Learning unit 9: Written representations (ISA 580) 35 TOPIC 2: Substantive procedures: the concepts 39 Learning unit 10: Principles in formulating substantive procedures 40 Learning unit 11: Substantive procedures with assistance of CAATs 55 Learning unit 12: Analytical procedures 61 TOPIC 3: Formulating the substantive procedures for the cycles 67 Learning unit 13: Revenue and receipts cycle 69 Learning unit 14: Acquisitions and payments cycle 76 Learning unit 15: Inventory and production cycle 82 Learning unit 16: Payroll and personnel cycle 94 Learning unit 17: Finance and investment cycle 103 TOPIC 4: Evaluating, concluding and reporting 109 Learning unit 18: Evaluation of misstatements identi fi ed during the audit (ISA 450) 111 Learning unit 19: Related parties (ISA 550) 115 Learning unit 20: Subsequent events 119 Learning unit 21: Provisions and contingent liabilities 128 Learning unit 22: Going concern and factual insolvency 132 Learning unit 23: Audit report 140
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iv Orientation and learning approach Welcome to the module Substantive procedures and fi nalising an audit (AUE3702). We are hoping that you will enjoy this module. By “enjoy” I mean that you approach the module with a positive mindset – not just to pass an examination – but rather to gain insight into and knowledge on the subject of auditing. Besides, the country needs knowledgeable, critical- thinking auditors. In addition you need to compete internationally, because we are part of the global economy. This is your opportunity to achieve just that. However, a prestigious quali fi cation like CA(SA) or Registered Auditor (RA) requires sacri fi ce, implying commitment and consistent hard work. This module will stretch and challenge you, so remember: “Never, never, never give up” (Winston Churchill). In this module we are mainly going to focus on the concepts of audit evi- dence, the gathering of evidence through substantive procedures (stage 3) and evaluating, concluding and reporting (stage 4) . Remember, you cov- ered stage 1 and 2 in previous auditing modules. The topics that we are going to cover are set out as follows: Topic 1: Audit evidence Topic 2:
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