You have obtained a copy of the published financial statements of Worcester Ltd, for the year 30 April 2021. You noted that the auditors had stated that they applied the following audit procedures to obtain audit evidence for the purposes of the audit:

 

Revenue recognition – occurrence and accuracy

•  Observing controls in-store at 20 stores randomly selected.
• Substantively testing a sample of revenue transactions back to cash receipt. 
• Analytically reviewing sales trends by week to identify trends and variances that would require further substantive testing.

• Inventory - valuation

• Testing the mathematical and allocation accuracy of the inventory provision models by re-performing the calculations using underlying inventory records.
• Corroborating that forecast product discounting curves applied in the inventory provision models are in use in the business through inquiry and discussion with the merchandising team; and
• Considering management’s qualitative assessment of factors impacting on inventory provisioning levels through discussions with management and comparison with retail and macroeconomic market research.

• Property, legal and other provisions and accruals – existence, accuracy, and completeness 

• Checking lease agreements for a sample of properties to confirm the contractual obligations.
•  Physical inspection of the company’s newly constructed Head Office at Birmingham and briefing by the architects. 
• Obtaining corroborative evidence from third parties in relation to material and relevant ongoing legal, tax and other matters.
•  Discussing provisions and assumptions with key management outside of the finance team including independent legal advisors and the internal UK property team.

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• Required:

  Explain the usefulness of any SIX of the ten audit procedures stated above and provide two limitations associated with each procedure in obtaining sufficient appropriate audit evidence.

Answer rating: 100% (QA)

Following are the usefulness of Audit Procedures 1 Classification testing Audit Procedures are used ... View the full answer