Audit Program WP Ref.

:
Prepared by:
Date:
Reviewed by
Date
Reviewed by
Date
Client: Ahmad Hassan Textile Mills Limited
Period: Ended on 30 June, 2019
Subject: Stock-in-trade

Amount in
Rs.
Account balances:
Raw material
Work-in-process
Finished goods

Classes of transactions:
Provision / Impairment loss
Cost of Sales

S. No. Audit Objectives Assertions Risk Assessment

IR CR CRA
1. Stock-in-trade is completely and
accurately recorded CA
2. All recorded stocks-in-trade actually
exist. E
3. Recorded s t o c k s -in-trade a r e
v a l u e d appropriately. V
4. Recorded stock-in-trade are owned by
the client and title is also in the name of
client. R
5. Stock-in-trade are presented and all
disclosures have been given in
accordance with the Fourth / Fifth
Schedule of the Companies Act, 2017 OCAL
and relevant IASs. RVU
S. No. Audit Procedures Objective Done by W. P. Ref.
Test of Controls
1. Assess the reasonableness of design of ALL
system of internal control by enquiring
relevant client personnel and
documenting the same (if not a
documented system manual has been
developed by the client). A walk through
test would be necessary to confirm the
understanding as documented. Identify
the preventive (exercised before
occurrence of transactions and event)
and detective (exercised after occurrence
of transactions and event) controls
established by management to support
its assertions.
2. Check on sample of selected ALL
transactions covering the whole period
that all preventive controls are exercised
on all transactions.
3. Check that proper inventory listing has ALL
been maintained and entries are made in
the same on prompt and consistent basis
and the same is reconciled with general
ledger and physically verified inventories
on periodical basis at least on annual
basis.
4. Check on a sample of transactions that CE
detective controls are appropriately been
exercised and in case of any detection of
error/ fraud, proper steps have been
taken to avoid recurrence of the same.
5. Ensure that management does not
override the designed controls by:

 Enquiring from the designated staff

person
 Remain skeptical during performing
test of design and test of effective
operation
6. Document the conclusion after N/A
performing test of controls and required
level of assurance from substantive
procedures.
Analytical Procedures
1. Assess the appropriateness of purchases U
and consumptions method and rate in
view of the flow of economic benefits.
S. No. Audit Procedures Objective Done by W. P. Ref.
2. Check the reasonableness of CAL
consumption allocated to inventories at
different stages.
3. Document logical commercial reasons for AU
purchases and consumption made during
the year
4. Check the appropriateness of compilation OAL
of overheads and allocation basis of the
same to different products.
5. Compare current year balances and CEA
expense with last year and ensure that
any significant variation should be
properly and logically reasoned.
Test of Details
1. Observe physical counting of inventories CE
carried out by the client at year-end or at
any other date and perform tests of
intervening transactions to ensure
existence and conditions unless
impracticable. Also check on sample
basis some items to ensure reliability.
2. Check that third party inventories are CR
identified and excluded from physical
count.
3. For items owned by client but not ER
physically held, obtain independent
confirmations from custodians.
4. Obtain final inventory compilation C
schedule and perform the following:
(a) Test casting and calculation of
schedule.
(b) Trace balances to the general
ledger.
(c) Trace quantities from physical stock
take working papers.
(d) Trace prices used to build up the
average cost to purchase invoices.
5. To test check cut-off of inventory, select CO
transactions from purchases, purchase
returns and sales (stock outs) of some
days before and after the year end and
ensure proper recording of transactions
in correct period.
6. Determine that the basis of valuation of V
e.g. FIFO or average cost is appropriate
and followed consistently.
S. No. Audit Procedures Objective Done by W. P. Ref.
7. Obtain stock card of some items and AC
ensure that cost formula is correctly
applied on receipts and issues.
8. Compare cost of closing stock with its V
NRV by comparing raw material with last
invoice from supplier, WIP with expected
cost to completion and finished goods
with market value less expenses
necessary to make the sale.
9. Obtain aging of inventories and compute V
provision for obsolete, damaged, or slow
moving stocks, if any. Ensure that raw
material of loss making and discontinued
products are adequately provided for.
10. Ensure that stores and spares related to
specific machinery should lie longer than
the machine.
11. Ensure that closing balances as per our N/A
working paper file are in match with
general ledger.
12. Where inventory values include a
proportion of overheads
- test calculations
- check reliability of source information for
numbers used in calculations
- consider compliance with accounting
standards
13. Where inventories are subject to
valuation by internal valuers consider the
basis on which it was done, the adequacy
of the evidence obtained to support the
valuation and the overall reasonableness
of the result.
14. Examine post year end records of
inventory returns relating to pre-year end
sales
15. Determine that disclosures have been OCAL
made in accordance with the RVU
requirements of Fourth / Fifth Schedule to
the Companies Act, 2017 and the
applicable IASs.
16. Identify old/ obsolete / slow moving
inventories during physical count. Make
necessary adjustments.
S. No. Audit Procedures Objective Done by W. P. Ref.
17. Check inventories pledged with third
parties / banks.

18. Prepare quantitative accounts and cross

refer quantities.