AUDIT PROGRAM

AUDIT ON ACCOUNTS PAYABLE

Procedures W/P Done by: Date: Remarks:
Ref.
A. Reconciliation of subsidiary ledger with general ledger
A1. Obtain a copy of
the entity's
reconciliation of
subsidiary ledger and
general ledger.
A2.Test the clerical
accuracy of the
schedule (e.g., footing,
cross-footing).
A3. Review the
reconciliation
prepared by the entity
between the sub-
ledger to the control
account.
A4. Investigate
reconciling items,
particularly any unusual
non-standard journal
entries.
A5. Inquire the client
for any differences and
request to make
appropriate
adjustments
B. Purchase and Accounts payable cut-off
B1. Obtain and
examine invoices from
suppliers and other
entities and other
documentation
supporting transactions
recorded in the
purchase journal and
cash disbursements
journal.
B2. Determine the last
vendor's invoice for the
period.
B3.Check if the
transactions recorded
are in the proper
reporting date paying
closer attention to
goods in transit.
B3.1. Inquire the client
for any differences and
request to make
appropriate
adjustments.
C. Confirmation of Liabilities
C1. Identify the major
suppliers of goods or
services to which
confirmation requests
should be sent.
C2. If the client objects
to sending
confirmation requests
to any of these
vendors, determine the
validity and
reasonableness of the
client's objection and
perform alternative
procedures.
C3. Mail the
confirmation requests
having the firm as the
addressee to the
replies.
C4. When confirmation
replies are received,
prepare a worksheet
summarizing the results.
The worksheet should
show :
(1) Vendor's name
(2) Balance per books
(3) Balance per
Confirmation
(4) Difference
(5) Explanation of
Difference
C5. Follow up and
resolve any differences
noted from the replies.
C6. Perform
alternative procedures
on confirmation
requests not returned.
C6.1. Examine unpaid
vendor invoices and
receiving reports.
C6.2. Vouch
subsequent payment
of the liability.
D. Perform a search for unrecorded liabilities
D1. Examine files of
unpaid or unrecorded
invoices, unmatched
purchase orders, and
unmatched receiving
reports and trace it to
the related journal to
determine if it was
properly recorded.
D2. Examine significant
recorded purchases
between the reporting
date and the date of
search for unrecorded
liabilities to determine if
this purchase should be
properly included in
the current year
financial statement.

D3. Obtain and review

minutes of meetings
and inspect contracts
to identify unrecorded
liabilities such as
liabilities on pending
litigations.
D4. Review cash
disbursements
subsequent to the
reporting date and
check whether this
may represent a liability
that should be
reported on the current
year.
D5. Request client to
make an appropriate
adjusting entry for any
unrecorded liability
identified by the
auditor.
D6. Ask the client
about their knowledge
of unrecorded liabilities
E. Perform the following analytical procedures for accounts payable
E1. Obtain balances for
the accounts related
to Accounts Payable
for the current and
prior year.
E2. Compare the
current year's account
balances with the prior
year's account
balances.
E3. Compute the
following ratios for the
current year and
compare with the prior
year's ratios:
(1) Accounts
payable turnover
(2) Days
outstanding in
accounts
payable
(3) Ratio of
Accounts
payable to
current laiabilities
(4) Ratio of
purchase returns
and allowances
to purchases
E4. Compare
significant ratios with
the industry norms
E5. Investigate any
unexpected changes
or the absence of
expected changes.
E6. Inquire the client of
any unusual
differences.
F. Investigation of transaction susceptible to fraud.
F1. Send blank
confirmations to
vendors requesting
them to furnish
information about all
outstanding invoices
and other pertinent
items (such as payment
terms, payment
histories, etc). Include
new vendors and
accounts with small or
zero balances.
F2. Obtain the master
vendor list from
management.
F3. Match vendor
names and addresses
per invoices with
master vendor list.
F3.1 If there are
mismatches, inquire
management.
F4. Search for unusual
or large year-end
transactions and
adjustments, e.g.,
transactions not
containing normal
processing initials, not
going through normal
processes, or not
having normal
supporting
documentation.
F5.Review vendor files
for unusual items, such
as manual and not
customized forms;
different delivery
addresses; and vendors
that have multiple
addresses.
F6. Inquire
management if there
are any unusual
transactions found.
 AUDIT ON CASH
PROCEDURES W/P Done by: Date Remarks
Ref.
A. Reconciliation
A1. Obtain from
management
information regarding
the company's bank
balance from BDO, BPI,
and PNB.
A2. Obtain a schedule
of cash disbursement
and cash receipts
journal.
A3. Trace any
uncleared checks to
the subsequent bank
statements.
A4. Use the company's
ending balance and
deduct any bank
service fees and
penalties.
A5. If there are any
interest earned, add it
to the company's book
balance.
A6. The adjusted book
balance should equal
that shown on the
company's bank
statement.
A6.1 If the company's
adjusted book balance
did not equate to that
of the bank statement
balance, inquire from
management as to the
difference.
B. Classification
B1. Obtain from
management any
information as to cash
restriction for future use.
B2. If yes, verify if it is
properly classified as
cash restricted for use.
B2.1. Check if proper
disclosure as to said
restriction has been
made in the financial
statements.
B2.2. If not, inquire the
management as to the
reason why it was not
disclosed.
B2.3. Propose to the
management the
proper disclosure of the
information.
B3. Ask the company if
there has been any
contractual obligation
relating to cash.
B3.1. If yes, check if it is
properly disclosed in
the financial
statements.
B3.2. If not, inquire the
management as to the
reason of failure of
disclosure.
B2.3. Propose to the
management the
proper disclosure of the
information.
C. Bank Confirmation
C1. Ensure that all
banks that the client
deals with are
circularized.
C2. Make a
confirmation letter for
the bank with the
proper format.
C3. Ask the entity to
complete and sign the
authorization on the
bank confirmation
request and allowing
auditors access to the
banks' subsequent
replies.
C4. The balance for
each bank account
should be agreed to
the following items:
I. Bank
Reconciliation
II. Interest
charges to
interest expense
account in the
general ledger.
III. If there are
any, details of
loans to the
disclosure in the
statement of
financial position
to ensure it is
correctly
classified into the
current and non-
current elements.
C5. If the bank does
not respond to a
confirmation request,
the auditor should send
a second request or
ask the client to remind
the bank on this matter.
 AUDIT PROGRAM ON INVENTORY
Procedures W/P Done by Date Remarks
Ref.
A. Advance Preparation
A1. Inquire of
management as to the
location of inventory
A2. Obtain the client’s
plan for inventory
counting. It shall contain
the following:
1) Date and time
inventory is to be
taken
2) Locations of
inventory
3) Method of counting
and recording
4) Instructions to
employees
5) Provisions for the
following:
 Receipts and
shipments of
inventory during
the counts
 Segregation of
inventory not
owned by client
 Physical
arrangement of
inventory
A3. Obtain a draft of the
physical inventory
instructions sufficiently in
advance of the inventory
date to discuss with the
client any necessary
revisions. Review proposed
inventory-taking
procedures and count
instructions. Discuss with
the client any potential
problem areas or
apparent weaknesses.
A4. Tour warehouse area
in advance of physical
inventory to assess stock
layout and areas that may
require special attention
during the physical
inventory.
A5. Obtain a list of:
 departments or
areas
 names of
department heads
 number (sequence)
of tags or count
sheets issued to
each department
 latest available
inventory amounts
in each department
A6. Determine the number
of test counts to be made
and recorded by us for
each department and
area, giving consideration
to the client's inventory
procedures and control
over inventory taking.
A7. Familiarize staff with
any carry-forward data
and special problems.
B. Observation of Client
Procedures
B1. Observe count teams
in action, noting
adherence to instructions,
care in making counts
and care over accurate
and complete recording
of descriptions or stage of
completion of in-process
inventories (e.g., last
operation number). If the
count teams are not
following the instructions,
the auditor should notify
the client representative in
the area.
B2. Note that count teams
systematically cover
assigned areas to ensure
complete coverage,
without overlapping areas
that are the responsibility
of others.
B3. Ascertain that count
teams deal with physical
movements in a manner
that will avoid duplicate
counts or exclusion from
the count.
B4. Determine that the
serial number, description
and last operation number
selected for count are
correct by referring to part
numbers stamped on the
material or requesting
identification by client
personnel.
B5. Ensure that the count
teams open some sealed
cartons or containers to
determine the quantity
and type of contents (i.e.,
identity, model number,
physical characteristics,
etc.) and agree these to
the description on carton
or container.
B6. Ensure that count
teams watch for empty
boxes, spaces in the
middle of stockpiles, etc.
B7. When appropriate,
ascertain that the client
compares counts with
perpetual records and
investigates immediately
any large differences.
B8. Observe that count
teams are noting
seemingly excessive, slow-
moving or damaged
inventory for later review.
B9. Ascertain that
consigned inventory or
previously scrapped
materials are omitted from
the physical inventory
taken by the count teams.
C. Testing by Auditor
C1. Select and count
certain boxes, piles or
stacks of itemsl and
compare the count with
the client's count,
description, last operation
and other data on
completed tags.
C2. Record sufficient
detail to enable exact
matching with inventory
summaries at a later date.
C3. Test count with the
client's count teams and
make sight test
comparisons of other
boxes or stacks, etc., of
the same or similar
products.
C4. Note seemingly
excessive, slow-moving or
damaged items for later
review.
C5. To the extent that
previously referred to
procedures or other
required procedures are
not carried out effectively
by client count teams,
perform or re-perform the
procedure.
D. Completion
D1. After completion of
the count make a final
tour of the area,
preferably with a
department head, and
note that all inventory is
tagged or listed.
D2. Any significant amount
of obsolete, slow-moving,
excess, damaged or
unusable inventory has
been recorded for later
inspection
D3. Record sufficient cut-
off data (see additional
comments below)
D4. Release the area to
the person designated in
the written instructions to
pull the inventory tags or
count sheets.
D5. Prepare a
memorandum for the
working papers:
Summarizing the results of
your observations, test
counts, etc., and
concluding on the
effectiveness of physical
inventory activities and
your degree of
satisfaction with them.
E. Tag Control and False
Inclusion Test
E1. Before the tags or
count sheets are sent to
the accounting
department, prepare or
obtain from the client a
summary of all tags or
sheets assigned to each
team, location,
department, etc., showing
tags or sheets originally
assigned, used, unused
and voided.
E2. Select several groups
of tags issued and inspect
the tags and document
the following in the
working papers:
a. The time and day
the tags were
authorized to be
pulled.
b. The serial numbers
of large blocks of
unused tags or
count sheets for
later testing of the
inventory
summarization to
ensure that they
remained unused as
a test for false
inclusion.
E3. Select and record (for
later comparison with the
final tabulation) a
consecutive number of
originally issued tags or
count sheets and account
for all serial numbers,
ascertaining that the
client has properly
recorded them as used,
unused or voided.
E4. As a precaution
against improper ("false")
inclusion of tags or lines on
count sheets, select
several of the "used" tags
or count sheets after the
client's summary of tags is
complete, and locate and
count the corresponding
item.
F. Shipping and Receiving
Cut-offs
F1. Visit the receiving and
dispatching areas and
ascertain that employees
in those departments
understand the
procedures to be followed
for identifying goods
received or shipped
immediately before and
after the inventory count.
F2. Select several receipts
and shipments prior to and
subsequent to the physical
inventory and record the
following:
a. Numbers of last
receiving reports
and a description of
the inventory that
is included in the
count.
b. Numbers of last
proof of deliveries
and a description of
the inventory for
goods that have left
the warehouse.
F3. Ascertain that related
material has been tagged
or counted. Ascertain that
goods have been
dispatched are not set
aside awaiting shipment.
G. Cyclic Counts
G1. Obtain and review
client instructions for the
selection of items to be
counted, physical count
procedures and
procedures providing
assurance of a consistent
cut-off between physical
inventories and
accounting records of
receipts, withdrawals and
shipments.

G2. Compare above

instructions and
procedures for
consistency with those
used for the cyclic
count(s) observed by the
auditor. (Procedures
similar to those discussed
above should be used to
observe the cyclic counts.
PHYSICAL INVENTORY
OBSERVATION FOLLOW-UP
H. Physical Inventory
Summarization
H1. Obtain final costed
physical inventory listings,
summaries and
reconciliation with general
ledger control accounts.
H2. Agree control account
balances and physical
inventory amounts on
reconciliation with general
ledger and costed
inventory listings.
H3. Using information
obtained at time of
physical inventory:
a. Agree test counts
to inventory listings,
agreeing tag or
count sheet
numbers, quantity,
description and
any other pertinent
data.
b. Agree information
regarding tag or
count sheet
numbers used to
inventory listings
and determine
that:
• Tag number
sequence is
complete
• Void and unused
tags or count
sheets are
excluded
• No additional
counts or lines
were added to
count sheets.
c. Determine that
appropriate action has
been taken with
respect to items
observed during
physical inventory to
be damaged,
obsolete, etc.
H4. Agree items selected
from final costed physical
inventory listings to original
company tags or count
sheets, etc., agreeing all
particulars.
H5. Review company tags
or count sheets for
possible alterations
subsequent to physical
inventory and fully
investigate any indication
of changes.
H6. Determine whether
shipping and receiving
cut-offs were properly
handled. (See additional
comments below.)
H7. Agree costs assigned
to quantities for selected
items to appropriate cost
records, suppliers' invoices,
etc.
H8. Review inventory
quantities and unit costs
on inventory lists and
summaries for such things
as:
a. General
reasonableness of
inventory by type,
category and
physical location,
when related to
knowledge of
operations, etc.
b. Reasonableness of
unit costs when
related to the type of
product and in
comparison to similar
products.
c. Possible extension
errors (misplaced
decimals, etc.)
H9. Test mathematical
accuracy of inventory
listings, summaries and
reconciliation to general
ledger accounts.

H10. Examine support, as

appropriate, for
reconciling items and
adjustments appearing on
the reconciliation.
H11. Examine proper
approval and recording of
book-to-physical
adjustments in ledger
accounts and detailed
records.
I. Shipping and Receiving
Cut-offs
I1. After completion of the
physical inventory taking,
the cut-off information
obtained should be
followed-up to ascertain
that:
(a) Suppliers' invoices for
items listed on receiving
reports prepared before
and after the inventory
dates are recorded as
accounts payable in the
proper period.
(b) Sales invoices for
items listed on shipping
reports or bills of lading
prepared before and after
the inventory dates are
recorded as sales in the
proper period.
(c) Inter-department
transfers of inventory have
been properly accounted
for at both locations.
J. Cyclic Counts
J1. Obtain results of cyclic
counts made throughout
the year, compare with
the results of cyclic
count(s) observed and
investigate significant
differences in results.
J2. Determine whether
adjustments resulting from
cyclic counts were
adequately investigated,
assessed as to implications
regarding accuracy of the
records and recorded.