C. HOTELS Auditing Help

AUDIT APPROACH

1. Obtain knowledge of the business

–  General level of economic acti it)’
–  Taxation policy
– The market and competition
– Cyclical or seasonal activity
– Regulatory structure
– Organization structure
– Experience of operating management
– Staging of accounting department
– Attitude to internal control environment
– Major suppliers
– Financial performance
– Key ratios
– Regulatory requirements
– Users of financial statements

2. Assess inherent risks and identify problems.
3. Develop an overall audit plan.
4. Obtain understanding of control environment

– Functions of management
– Segregation of duties
– Internal audit
– Budgetary control

5. Obtain understanding of control procedures.

– Computer general controls and application controls
– Types of reconciliation’s prepared.
– Checking arithmetical accuracy of records
– Control accounts and trial balances
– Approval and control of documents
– Comparing results of cash, inventory and fixed assets to accounting records
– Limiting direct physical access to assets and records.

6. Perform tests of controls

– Inspect documents to gain audit evidence that controls have been complied with
– Inquire and observe implementation of controls
– Re perform internal controls to obtain evidence that they have been appropriately applied.
7. Establish degree of reliance to be placed on internal controls.
8. Determine nature, scope, and extent of the required substantive
procedures.
9. Perform substantive procedures.
10. Issue audit report

SUBSTANTIVE PROCEDURES

1. Count cash on hand.
2. Verify bank reconciliation.
3. Obtain confirmations for bank balances.
4. Circularize accounts receivable and check subsequent collections.
5. Evaluate adequacy for allowance for doubtful accounts.
6. Observe physical inventory count.
7. Verity creditors and accrued expenses with suppliers’ statement  of accounts and subsequent payments.
8. Carry out cut off procedures.
9. Verify cash book with window ledger.
10. Examine visitor’s ledger to ensure that all charges have been billed and recovered.
11. Compare room occupancy data with related revenues.
12. Compare room occupancy rate from month to month and inquire into unusual fluctuations.
13. Ensure that all income accrued but not received has been accounted for.
14. Test count hotel’s fixed assets items from fixed assets register and from physical to fixed assets register.
15. Obtain or prepare a month – to – month comparison of cost of meals and investigate unusual fluctuations.
16. Inspect financial statements to ensure. that presentation and disclosures are in accordance with International Accounting Standards and comply with local regulations.

D. NEWSPAPERS

AUDIT APPROACH

l. Obtain knowledge of the business

– General level of economic activity
– Taxation policy
– The market and competition
– Regulatory structure
– Organization structure
– Experience of operating management
– Staging of accounting department
– Attitude to internal control environment
– Major suppliers
– Financial performance
– Key ratios
– Regulatory requirements
– Users of financial statements

2. Assess inherent risks and identify problems.
3. Develop an overall audit plan.
4. Obtain understanding of control environment

– Functions of management
– Segregation of duties
– Internal audit
– Budgetary control

5. Obtain understanding of control procedures

– Computer general controls and application controls
– Types of reconciliation’s prepared.
– Checking arithmetical accuracy of records
– Control accounts and trial balances
– Approval and control of documents
– Comparing results of cash, inventory and fixed assets to accounting records
– Limiting direct physical access to assets and records
– Issue of papers to.newspaper agents and subscribers.
– Retained newspapers.

6. Perform tests of controls
– Inspect documents to gain audit evidence that controls have been complied with
– Inquire and observe implementation of controls
– Re perform internal controls to obtain evidence that they have been appropriately applied.

7. Establish degree of reliance to be placed on internal controls.
8. Determine nature, scope, and extent of the required substantive
procedures.
9. Perform substantive procedures.
10. Issue audit report.

SUBSTANTIVE PROCEDURES

1. Count cash on hand.
2. Verify bank reconciliations.
3. Obtain continuations for bank balances.
4. Circularize acc<?untsreceivable and check subsequent collections.
5. Evaluate adequacy for allowance for doubtful ac.counts.
6. Observe physical inventory count.
7. Verity creditors and accrued expenses with suppliers’ statement of accounts and subsequent payments.
8. Carry out cut off procedures.
9. Verify receipts from subscribers and advertisement charges.
10. Inspect supporting documents for payments made to contributors.
11. Verify advertisement revenues from advertisement journal.
12. Carry out analytical procedures.
13. Ensure that all income accrued but not received has been accounted for.
14. Test count fixed assets items from fixed assets register and from physical to fixed assets register.
15. Obtain or prepare a month -to – month comparison of revenues and expenses and investigate unusual fluctuations.
16. Inspect financial statements to ensure that. presentation and disclosures are in accordance with International Accounting Standards and comply with local regulations.

E. SHIPPING COMPANIES

I. Obtain knowledge about the entity’s operations and level of competence of management.
2. Discuss with management significant business risks.
3. Ascertain accounting and internal control system.
4. Assess inherent and control risk and set materiality level.
5. Ascertain number of vessels available.
6. Obtain details of territories covered by each vessels during the accounting period.
7. Investigate reasons for gaps between various voyages.
8. Ascertain capacity of each vessel.
9. Verify adequacy of deprecation on vessels.
10. If the vessels have been taken on lease, ensure that the vessels have not been capitalized beyond their present values of minimum lease payments.
11. On a test basis verify certain voyage accounts. Vouch revenues and expenses of each voyage with supporting documents.
12. Verify proper treatment of transactions in foreign currencies.
13. Check cut offfor incomplete voyages at end of accounting period.

Posted on November 4, 2015 in Audit of Specialized Industries

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