Workshop 3: Designing Substantive Testing

Background information

Assume that your audit partner asks you to design detailed substantive testing programs for accounts receivable and sales; inventory; purchases and accounts payable; and payroll systems of Air New Zealand. Your partner also asks you to incorporate specific analytical procedures and tests of detail (i.e. direct tests on balances and tests of transactions of a balance).

Note that-identified weaknesses and other issues, as described in each of the following subsystems (a - e), are created for teaching purposes and bears no relationship to events relating to Air New Zealand, nor does it apply to any other organization.

Required:

Design/develop a substantive audit tests program and explain & justify your audit program in terms of audit objectives (also called'audit assertions')

Please divide it into the 3 main collums: Audit objectives, Key Assertations; and Audit Procedures. Also, please provide the opinion on it.

Payroll Subsystem (Labour Expenditure):Assume that Labour expenditure includes airlinecrews, general employees and contractors. Any changes to airline crews and general employees'salaries and conditions are negotiated by the union. Previously it was observed that there is usually a delay between when a negotiation is complete and the time at which that is incorporated into the system. Net salaries are made by auto-deposit to the all employee's bankaccount. No comparisons are made between employee records and this payment system. Also assume that in recent years average staff turnover is very high and processes to close personnel files when someone leaves are weak.