AUDITING Essay Example | Topics and Well Written Essays - 2000 words

AUDITING - Essay deterrent exampleThe paper will also indicate any recommendation on furthering the audit in causal agent of an audit problem. Finally the paper will outline the actions following the further work done on the audit. Analysis of the Four Items Debtors During interim audit preparation, a disposition of who owes the company and the total amount they owe is drafted. According to the trial balance dated thirty-first March 2011, the amount expected from the debtors amounts to 950,000 pounds. During auditing, the expectation is that the scroll of debtors or the accounts receivables should always agree with the figures in the financial statements (Loughran 2010). Audit problems normally arise as a result of not taking into manageations the risks involved when dealing with accounts receivables. The accounts receivables that have been listed may be inaccurate. It is also attainable that the receivables may not be existing or may not be collectible. The audit should consi der the write offs of the bad debts. The sales transaction should always be processed at the right geological period to avoid recording of sales due the next period. In this case for instance, Multi gym which is a esoteric company, may be defaulting from paying 95,000 pounds, the reason being the machines they purchased from Wentworth Brewster limited could be used for reasons related to kettle of fish (Montgomery 2009). This thereof, has to be indicated in the bad debts and deducted from the accounts receivables. There debtors have balances at the end of the year that range from 5000 to 20000 pounds. The proper(postnominal) amount of the balances is not specified. This could lead to assumptions that may trigger false figures in the income statements. The enrolment for the accounts receivables hold be reviewed so tomatch with those in the financial statement. Claim for Damages During audit preparation, a schedule should be done relating to the creditors of the firm or those i ndividuals or business that have a claim. The totals in the formulated list should always be equal with the figures in the financial statement. According to the trial balance dated 31st March 2011, the total amount of money claimed for damages is 25000 pounds. This amount should be included in the schedule as amount payable to the individual claiming. However, the draft has not included provision for claims from other customers (Loughran 2010). For instance, the deuce-ace customers have placed claims against retailers for suffering injuries as a result of vague instructions. For there to be a correct indication of the reality on the grounds, the draft should make a provision for such claims thence they will be directed to the company. Stock The trial balance indicated stock amounting to 1.6 million pounds. According to the located down accounting principles, it is required stock for the previous period to be reported in that period. This therefore presents an audit problem. In ord er to determine stock for the period, the amount of stock currently being held is subtracted from sales of that period. This resulting figure indicates the stock that has been sold. This is therefore added to the beginning inventory to determine the total stock available for dale. This is where the audit discovers that 0.5 million stock was included in the previously concluded period. Rent Rent when considered as an income should be recorded in the period, it is received and not reported. According to