O N FI N A N C IA L S TA TE ME N T

AUD I T
IN TI M OHD ZAIDI 10DAT15F2031
AFR EE N A A ZZ A H R A B
A B D U LLAH 10DAT15F2026
N U R SO FI A N A B IN T I
ZAM 10DAT15F2056
YAZMIN ATIQAH BINTI NOR
T I B IN T I AZIZAN 10DAT15F2048
NUR EL M IS S A IZ ZA N
I A B D U L RASHID 10DAT15F2028
NO O R U M IR A H B IN T
N 10DAT15F2067
VARADAN A/L K RAJENDRA
AN 10DAT15F2058
THARSHAN A/L MANOHAR
A S A MY 10DAT15F2068
BA V IT H IR A N A /L R IN A G
3.1 REVENUE AND EXPENDITURE
COMPONENTS
COMPONENTS OF THE EXPENDITURE

PURCHASE
ACCOUNTS PAYABLE
CASH PAYMENTS
COMPONENTS OF THE REVENUE CYCLE

SALES
ACCOUNTS RECEIVABLE
CASH RECEIPTS
3.1.1 PURPOSE
MEASURED AT THEIR FAIR VALUE OF THE CONSIDERATION RECEIVED AND
RECEIVABLE.
ENSURE VOLUNTARY COMPLIANCE BETWEEN ALL DOCUMENTATIONS,
CONTROL, POLICIES AND GUIDELINES.
TEST CONTROL FOR DETECTION SIGNIFICANT WEAKNESSES AND CHECK
FINANCIAL STATEMENTS.
3.1.2 EVIDENCE

Evidence Selection
a)Sales Of Goods And Services
b)Payments Received For Goods And Services
c)Good Returned By Claims Received From Customers
A) SALES OF GOODS AND SERVICES
Receiving And Recording Customers Orders.
Authorising Credit Terms And Shipment.
Confirming Orders.
Executing Shipping Orders For Goods Or Work Orders For The
Performance Of Services.
Recording The Shipments Or Services Performed.
B) PAYMENTS RECEIVED FOR GOODS AND SERVICES

Receiving The Cash And Depositing In The Bank Cash.

Comparing Amounts Remitted With Recorded Amounts.
Authorising Discounts And Allowances.
Recording Cash Receipts, Discounts And Allowances
.
C) GOOD RETURNED BY CLAIMS RECEIVED FROM
CUSTOMERS
Receiving And Accepting Goods And Claims.
Preparing Receiving Reports.
Reviewing Claims.
Authorising Credits.
Preparing And Mailing Credit Memo.
Recording Returns And Claims.
 3.1.3 SUITABLE AUDIT OBJECTIVES
Authorisation all are pre-approved by responsible personnel.
Completeness all valid transactions are included in the accounting records.
Accuracy that amounts relating to transactions and have been record correct amount
Validity all recorded transactions fairly represent and executed in accordance
Physical safeguards and security access to physical assets and information systems controlled and restricted to
authorized personnel

Error handling - errors detected at any stage of processing receive prompt corrective action
Segregation of duties duties are assigned to individuals in a manner that no one individual can control the
recording function and the procedures relative to transaction.
3.1.4 SUITABLE AUDIT TEST
Vouching
Verifications
Test Of Control
Substantive Test
Walk Through Test
Rotation Test
PURCHASES SYSTEM

OBJECTIVES

To ensure that there are proper internal controls over the purchases system.
To ensure that purchases are properly accounted for and recorded in the
correct accounting period.
Key control features Audit procedures Audit assertions
Requisition 1. Ascertain system for requisition for purchases and Existence
services required. Occurrence
2. Check approvals for requisition of purchases and
services required.
Purchase orders 1. Check approvals for issue of purchase orders and the Existence
authorization limits. Occurrence
2. Check purchase orders to requisition forms.
3. Vouch to quotations from suppliers.
4. Obtain list of normal suppliers, where available
5. Check terms and conditions of purchases.
Goods Inwards and Return of 1. Check goods received notes to purchase orders and copy of Occurrence
Goods suppliers delivery notes. Measurement
2. Ensure indication of check for quantity and quality of goods Completeness
received. Valuation
3. Check that goods returned to suppliers are documented.
4. Ascertain basis of valuation of inventories (costing).
5. Check computation of costing of inventories.
6. Check posting of inventories to inventory records/ subsidiary
ledgers.
Invoices and Credit Notes from 1. Match suppliers invoices to purchase orders and goods received Rights/
suppliers notes. Obligations
2. Ensure invoices are cross-referenced to purchase orders and Measurement
goods received notes.
3. Check prices, arithmetical accuracy and other terms of purchase.
4. Ensure that credit notes received are matched to the
corresponding return f goods.
5. Ascertain system of control over suppliers invoices.
Payments
Reconciliation of statements
Posting to ledgers
1. Ensure all supporting documents are attached Existence
and checked for arithmetical Occurrence
2. Ensure proper approvals are given
3. Check that discounts or credits given have
been received and netted off against the
payments.
1. Ensure suppliers statements are reconciled Completeness
regularly
2. Review reconciliation and ensure long
outstanding items are resolved
1. Check posting to inventory, creditors Measurement
subsidiary and general ledger accounts Completeness
2. Check reconciliation of creditors subsidiary
and control accounts.
AUDIT EVIDENCE AND AUDIT TEST FOR PURCHASE

Audit evidence Audit test

Documentation requisition order Substantive tests
- purchasing order
- invoices
Analytical review procedure Analytical procedures
Mathematical evidence Compliance test
SALES SYSTEM

OBJECTIVES

To ensure that there are proper internal controls over the sales system.
To ensure that sales a properly accounted for end recorded in correct
accounting period.
 KEY CONTROL AUDIT PROCEDURES AUDIT
FEATURES ASSERTIONS
Acceptance of 1. Ascertain the manner order are taken, whether orally , in
orders written form of electronically
2. Check to documentation for orders. Existence
3. Check for approvals for acceptance of orders. occurrence
4. Ascertain follow up action taken for unfulfilled orders.
Goods outwards 1. Check allocation of inventories based on approved
and return of orders.
goods 2. Ensure proper approvals obtained for dispatch of goods. Occurrence
3. Ensure proper recording of inventory movements.
4. Ensure damaged inventories are properly accounted for.
5. Check return of inventories to appropriate documents.
Pricing 1. Check to ensure an official price list is use. Rights /
2. Check terms and conditions for discounts or variation in obligations
pricing for certain customers. measurement
Invoicing 1. Ascertain invoicing system.
2. Ensure invoices are referenced to orders and delivery notes. Completeness
3. Check pricing and ensure terms of sales are in accordance with Measurement
companys policies. Valuation
4. Ascertain reasons for cancellation of sales invoices.
5. Check calculations.
Credit notes 1. Ensure proper authorization for issue of credits notes. Existence
2. Verify reasons for issuance. Occurrence
3. Vouch to supporting documents for return of goods, discounts given,
adjustment in pricing, etc.
Credit control 1. Ascertain system of credit control in force . Existence
2. Ascertain companys approved credit limit and periods. Occurrence
3. Check subsequence payment from customers.
4. Review credit control report.
5. Identify doubtful debt cases and ascertain actions taken by management.
6. Review correspondences with customers and lawyers.
Posting to 1. Check posting to inventory, debtors and general ledger accounts. Measurement
ledgers 2. Check reconciliation of debtors subsidiary and control account. Completeness
AUDIT EVIDENCE AND AUDIT TEST FOR SALES

Audit evidence Audit test

Documentation Debit note Tests of controls
- Credit note
- Invoice
- Receipts
Confirmation Test of details of balances
Re- performance / Recalculation Substantive test
RECEIPTS SYSTEM

OBEJECTIVES

To ensure that there are proper internal controls over the receipts system.
To ensure that receipts are properly accounted for, banked intact ad recorded in
the correct accounting period.
Key controls Audit procedures Audit assertions
features
Issue of Official 1. Ensure official receipts are issued in numerical sequence. Existence
Receipts 2. Check acknowledgement of receipts by person issuing the Occurrence
official receipts.
Collections 1. Ensure cash collections are in safe custody. Existence
2. Ensure cheque collections are properly accounted for Occurrence
Documentation 1. Vouch to sales invoices and other relevant supporting Rights/
documents for receipts. Obligations
Occurrence

Banking 1. Check to bank-in sips to ensure that collections are bank-in Occurrence
promptly and intact Completeness
2. Cheque receipts to cash book and bank statements
Reconciliation 1. Examine bank reconciliation statements and ensure Completeness
outstanding items are subsequently cleared.
2. Ensure that bank reconciliation are reviewed by a responsible
official regularly

Posting 1. Trace transactions to cash book and bank statements Measurement

2. Check posting to cash book, debtors subsidiary ledgers and Completeness
general ledgers
PAYMENTS SYSTEM

OBJECTIVES

To ensure that there are proper internal controls over the payments system.
To ensure that payments are for valid transactions and are properly accounted
for and recorded in the correct accounting period.
Key controls features Audit procedures Audit assertions
Issue of payment vouchers 1. Ensure payment vouchers are issued in numerical sequence Existence
2. Ensure proper allocation of expenses to accounts Occurrence
3. Ensure indication of check by person issuing the payment Measurement
vouchers
4. Ensure all cheques are crossed A/C Payee Only

Documentation and 1. Ascertain limits of authorization for payments and for Existence
approvals cheque signatories Occurrence
2. Ensure that there are proper approvals for payments made. Rights/
3. Vouch to relevant supporting documents for payments and Obligations
ensure that they are stamped PAID
4. Ensure official receipts are obtained as acknowledgement
of payment.
Reconciliation 1. Examine bank reconciliation statements and ensure Completeness
outstanding items are subsequently cleared.

Posting 1. Trace transactions to cash book and bank statements Measurement

2. Check posting to cash book, creditors subsidiary ledgers Completeness
and general ledgers
PAYROLLS SYSTEM

OBJECTIVES

To ensure that there are proper internal controls over the payroll system
To ensure that payroll are properly computed and are for bona fide employees
Key control features Audit procedures Audit assertions
Company policy 1. Ascertain companys policy on employment and other terms of
remuneration
Segregation of duties 1. Ensure that there is proper segregation of duties for payroll between
preparation and checking of the particulars
2. Ensure that there is rotation of duties

Preparation of payroll 1. Check to personnel records to ensure that employees are bona fide Existence
2. Ensure that there is proper written authorization for promotions and Occurrence
increments Rights/
3. Check that proper rates are being used for overtime calculation Obligations
4. Check completion of payroll and that appropriate deductions have Measurement
been made
5. Check casting of payroll
6. Ensure indications of check of payroll on the payroll listing
Payment 1. Check procedure for payment of salaries, by cash, Existence
cheque or direct credit to bank accounts of staff Occurrence
2. Ensure that subsequent payments to the relevant Rights/
authorities eg. EPF, SOCSO, IRB are made on a timely Obligations
basis Measurement
3. Attend payment of wages to workers, where relevant, to
ascertain existence and control procedures
4. Ascertain procedure for unclaimed salaries or wages
Reconciliation 1. Check reconciliation of 2 months salary payments Completeness

posting 1. Check posting to the relevant accounts in the general Completeness

ledgers
3.2 CASH AND BANK
BALANCES EVIDENCE
3.2.1 PURPOSE

CONSIST OF CONFIRMATION OF BANK BALANCES AND OTHER MATTERS

FROM THE CLIENTS BANKERS AT THE PERIOD END.
STANDARD LETTERS ARE USED TO CONFIRM INFORMATION WITH THE BANK
WHERE THE CLIENT HAS DEALINGS.
3.2.2 EVIDENCE
LIQUID ASSETS AND INCLUDE: NOTES AND COINS, BANK CURRENT
ACCOUNTS, BANK DEPOSIT ACCOUNTS.
VULNERABLE ASSETS BECAUSE OF ITS LIQUIDITY.
EASILY VERIFIED BECAUSE THEY CAN BE CONFIRMED DIRECTLY BY THIRD
PARTIES OR BY PHYSICAL COUNTS.
3.2.3 AUDIT OBJECTIVES AND ASSERTIONS
ASSERTIONS DESCRIPTIONS
Existence To ensure that the cash is actually in existence and belong to the company at
a given date or at the year-end date.
Completeness To ensure that there is no unrecorded cash.
Accuracy To ensure cash at bank stated on the reconciliation is accurate.
Cut-off To ensure that amounts are correctly recorded in the proper period.
Presentation and To ensure that the cash balance and related statement of comprehensive
Disclosure income entries are correctly disclosed in the financial statements in
accordance with legislation and accounting standards.
Detail tie-in Cash in bank as stated on the reconciliation foots correctly and agrees with
the general ledger.
3.2.4 SUITABLE AUDIT TEST TO BE
USED WHEN AUDITING
 CASH BALANCES
AUDIT OBJECTIVES SUBSTANTIVE PROCEDURES
Occurrence, Completeness and Agree balance on bank confirmation with bank reconciliation and cash book.
Valuation Trade deposits in transits, outstanding cheques and other reconciling items to cut-off bank
statements.
Accuracy Check calculation of bank reconciliation and agree with book balance on cash book and general
ledger.
Cut-off For cash receipts, observe cash count for the last day of the year end and trace deposits to cash
receipts journal and cut-off bank statement.
For cash disbursement, record the last cheque issued at the year end date and trace to cash payments
in the cash book; and trace outstanding cheques on bank reconciliation and investigate any cheque
clearing after a long delay.

Classification, Presentation Review board of directors minutes, bank letter, loan agreement or other documents for any
and Disclosure restrictions on cash. Ensure bank loans and overdrafts are not off-set against positive bank balances
in the financial statement.
 BANK BALANCES
a) Test the mathematical accuracy of the bank reconciliation and agree the balance in
the cash book.
b) Agree the bank balance on the bank reconciliation with the balance on bank
confirmation.
c) Trace the deposits in transit on the bank reconciliation to the cut-off bank statement
covering a week after the date on which the bank account is reconciled.
d) Agree any charges included on the bank statement to the bank reconciliation.
e) Agree the adjusted book balance on the cash account lead schedule.
f) Trace bank transfers for last week of financial year under review and first.
g) Identify irregular items and obtain necessary explanation.
3.2.5 SUITABLE AUDIT PROCEDURES
AUDIT OBJECTIVES SUBSTANTIVE PROCEDURES
Occurrence / Existence Select samples of cash receipts from cash book and trace to remittance advices,
pay-in slips, and bank statement.
Select samples of cash payments from cash book and trace to payment
vouchers (with supporting documents) and bank statements.
Scan through the entries and trace all the unusual items, like contra items,
stopped payment items and cancelled cheques, to support documents and
authorization.
Completeness Trace a sample of remittance advices and pay-in slip to cash receipt journal.
Trace a sample of payment vouchers (with supporting documents) to cash
book.
Accuracy Agree the total of cash receipts and payments to general ledger.
Valuation Compare a sample of remittance advices with amount in
cash receipts recorded in the cash book.
Compare a sample of (cancelled) cheques with amounts in
cash recorded in the cash book.
Cut-off Compare the dates for recording a sample of cash transactions
with the dates of cash deposited in bank or cheques sent.
Classification Examine a sample of cash receipts and payments
transactions for proper classification.
BANK RECONCILIATION

OBJECTIVES
- TO ENSURE THAT BANK RECONCILIATIONS ARE PREPARED ON A REGULAR
BASIS AND ARE PROPERLY REVIEWED
- TO ENSURE THAT OUTSTANDING ITEMS ARE PROMPTLY CLEARED
 SUITABLE AUDIT PROCEDURES
Key control features Audit procedures Audit Assertions
Regular preparation 1. Obtain monthly bank reconciliation statements Completeness
2. Check balances to cash book and bank statements
Follow up 1. Ensure outstanding items are subsequently cleared Existence
2. Ensure items in the bank statement but not in the Occurrence
cash book are subsequently taken up and vice Rights/ obligations
versa Completeness
3. Confirm balances with banks valuation
4. Ascertain any overdraft facilities and securities,
where relevant
CASH IN HAND

OBJECTIVES
- TO ENSURE THAT CASH HELD IN HAND ARE PROPERLY ACCOUNTED FOR
- TO ENSURE THAT CASH COLLECTED IS PROMPTLY BANKED AND INTACT
 SUITABLE AUDIT PROCEDURES
Key control features Audit procedures Audit assertions
Companys policy 1.Ascertain companys policy for the handling of
physical cash
Petty cash 1.Ascertain whether petty cash is maintained on an Existence
imprest system Occurrence
2. Check that proper supporting documents are attached Rights/obligations
for petty cash payments measurement
3. Ensure that there are proper approvals
4. Check limits of reimbursement for petty cash
5. Ensure petty cash payment vouchers are properly
stamped PAID after reimbursement
6. Ensure proper analysis of expenses
7. Conduct surprise count for petty cash
Cash collections 1. Ascertain basis of cash held for operations Existence
purposes Occurrence
2. Ensure that collections are banked-in promptly Rights/ obligations
and intact valuation
3. Ensure that cash held overnight are kept in safe
custody
4. Obtain confirmation of cash held as at year end

posting 1. Check posting to petty cash and accounts in the completeness

general ledgers