Question

AUDITING II

(a) Discuss the audit procedures to verify the existence and valuation of freehold, owned by the organisation.

(b) Discuss the audit procedures to verify the existence and valuation of buildings erected or improved during the financial year

(c) Discuss the use of microcomputers in the conduct of an audit concerning audit planning

Answer 1

(A) Audit procedures to verify the existence and valuation of freehold, owned by the organisation

1. The auditor should examine the title deeds in order to ensure that they are in the name of the client.

2. In case the property is mortgaged, he should obtain a certificate from the mortgagee to the effect that the title deeds are in their possession. He should also inquire whether there is any second or subsequent mortgage or not.

3. If it is purchased, correspondence and broker’s note should be examined. If the purchase is effected through auction the auctioneer’s account should be checked.

4. If the client has constructed the building, the auditor should examine the certificates received from the builder, contractor, architect and other necessary papers and documents.

(B) Audit procedures to verify the existence and valuation of buildings erected or improved during the financial year:

The Auditor should monitor billing and construction costs to make sure that the project is moving forward according to plan and on budget. Delays eventually lead to added costs if a contract term needs extended, so monitoring time management is essential. The auditor may also assess the actual work site and find ways for the building process to be streamlined or pivoted to address outside factors, such as weather issues or a problem with delays due to compliance with municipal building codes.

(C) Use of micro computers in the conduct of an audit

If the auditors have their own microcomputers. they do not have to disrupt the client’s operations. The audit staff can do the work itself rather than rely on the personnel of the audited firm to provide computer support. Audit independence will be increased, and auditors can better assess whether the data supplied by the client was accurate and well supported. Microcomputers can be used for audit administrative support. For example, word processing, scheduling audits, spreadsheets and budgeting. To conclude we can say that microcomputers are new tools that can help make auditing more productive.