Experience streamlined sales audit procedures in affidavits

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what's up audit fans dr amanda white here and today we're going to look into designing audit procedures now i've talked about this a lot before i have an entire series devoted to different examples for designing tests of internal controls and substantive tests that you might see in common types of businesses now as a result of those videos i have been overwhelmed with requests really specific stuff like can you please make a video for pension assets for african ports uh organizations or can you give me an audit program for you know this very specific industry and your this very specific account and while i love hearing from you and getting your requests i'm not i guess helping you develop the right sort of skills you're going to need as an auditor by me making thousands and thousands and thousands of example videos there is that old saying you know buy a man a fish or give a man a person a fish you'll feed them for a day teach them how to fish they'll be self-reliant for the rest of their lives so today what i'm going to do is go back to basics because i want everybody out there who thinks can you write an example for this can you do an example for this account for this type of business i want you to be able to do this yourself and not rely on me and my specific examples but be able to design this because you understand the principles around audit evidence and audit procedure design let's get into it [Music] hi everybody and welcome to the channel this is amanda loves to order i am amanda i do love to audit and i teach audit to undergrads at a major australian university and as of 2022 i'm also going to be teaching first year accounting to over two and a half thousand students per year i'm slightly afraid um of that one i love auditing i started out my career at a big4 accounting firm before moving into academia and i love teaching students about accounting and especially about auditing so today is about building some skills of self-reliance it's actually a video to get you to stop watching my videos and start creating and doing yourself and this is the process to design audit procedures now this process doesn't come from any specific textbook or auditing standard this comes from my years of experience in public accounting my years of experience in teaching auditing in reviewing textbooks and trying to get students to design audit procedures in the best way possible so this is i guess my own method that i've used very successfully and that students of mine who have used this method when they go out to their graduate jobs say that the senior or the manager is really impressed with their understanding of audit assertions audit procedures and their design characteristics so a lot of this comes out of textbooks which used to say things like vouch sales they would have an audit program and they would say vouch sales and i was like hang on if i'm a new auditor what am i supposed to do when i was a a new auditor as a trainee it would often get procedures that would just be one line and i'd have to ask a whole lot more questions who am i supposed to talk to about this what documents what am i doing with these documents so my four procedures is to make you self-reliant to make you have the skills or help you get the skills to be able to design any audit procedure for any account at any type of company anywhere around the world so that you don't need me you're out there doing it on your own so i've talked about this in other videos within other videos but i thought i'd do a specific video on this and there are four really easy steps number one very first step is that we want to use the right audit terminology just like a doctor um you know pastry chefs engineers use specific terms we have our own terminology we have our terminology around systems of internal control around our assertions and around our audit procedures and you'll find those audit procedures in isa asa 500 right there in the appendices and they have things like inquiry confirming recalculating analytical procedures re-performance um inspection and then i add some additional ones onto that i add vouching and tracing there's only eight there's one more if you can remember what it is of the nine procedures i normally use add it there down in the chat so we always start with using the right procedure name am i vouching something am i talking to someone am i confirming something so step one is to always use the correct audit terminology that shows that you're a professional step two is that you want to use client or case specific terminology so if you're a real life auditor out there you talk to your client you use their terms for documents processes people if you're a student and you've been given a case for an exam use the information in the case the document names the people the departments that proves to whoever is reading your procedure that you know how to integrate the professional knowledge those audit that audit terminology with the case or the client it shows that you're integrating information which is what we want to see you're not just randomly trying to remember some procedure so this shows greater depth of understanding so terminology from the audit perspective terminology from the client perspective number three in my list is be specific all right and when i say specific what sort of things do i mean specific of it could be be really clear on the population that you're going to sample from i'm going to vouch a sample from sales journal entries all right then i've mentioned the population sales journal entries be really specific about the sampling method am i using haphazard random interval monetary unit or dollar unit sampling am i judgmentally selecting so specific specificity includes population sampling what documents you're going to look at i want to look at invoices i want to look at this reconciliation i want to also grab this master price list and then the last part in terms of being specific and having good levels of specificity is to have detailed steps all right so you're going to vouch a haphazard sample of sales journals to the proof of delivery to the customer to the original customer order and then what are you going to do with those documents oh i'm going to check that the quantity i recorded in the sale is the same quantity that i delivered to them so lots of detailed steps which is much more clear than voucher sample of sales journal entries in which i'm going what what do you want me to look for what things am i checking okay so let's recap audit terminology number one number two is client or case specific terminology number three be specific and number four make sure that you go back to your test and you review it and you say is it fit for the purpose that i intend to use it for if you're testing an internal control have i described what i need to test correctly have i looked for some proof of the control a signature a match some sort of system reconciliation a code if i'm testing an assertion does this procedure really go back and match that assertion i might say i'm going to recalculate these invoices and make sure that they trace forward correctly to the journal entry now if i said i'm going to test occurrence by doing that procedure i'd be wrong because i'm talking about recalculating in money which means i'm using the accuracy assertion and that's a really common thing so common things that i see in exam mistakes are number one testing and internal control when you should be substantive testing or vice versa um number two saying you're going to be testing you know a certain assertion and then giving me a procedure for something else um and the most common mistake i see is students writing down audit procedures that are wrote learned from something else last semester my students had an audit exam based on what did we do last semester i think it was a oh that's right we did a hospitality company so a company that owned bars restaurants hotels and i had students i i asked them to audit wages expense i had students writing procedures about accounts receivable about sales about accounts payable that weren't even related to the question that i'd set them so don't make that mistake so again to recap four simple rules number one use the right audit terminology number two use the right client and case specific terminology to show your mastery and your ability to integrate this information and understand number three be specific including things like population sampling documents you're going to look at steps that the auditor needs to take don't be afraid of writing a procedure that's three or four sentences long and then number four go back to your test review and make sure it's fit for the purpose that's being asked of you with these skills you can write an audit program for any account for any type of company for any set of internal controls you don't need to come back to me and ask me to write something you can do this yourself and your ability to write and design audit procedures comes with practice it's like learning to ride a bike watch a whole lot of videos on it but until you get on the bike itself and you learn to balance and you learn how difficult it is and you've got to manage balancing and paneling and steering all at the same time you won't get the hang of it and that's exactly the same with audit procedures so thank you to all those people that have requested very specific accounts um over you know the last couple of years but i want you to be self-reliant i want you to push away from needing me to provide that guidance and this will put you in good stead for the rest of your audit career so i hope you found that video useful i'd love to hear your thoughts in the comments are there any other tips that you would have for our fantastic audit learning community about how to design internal control tests and substantive audit procedures i'd love for you to share those with the rest of my viewers we're all learning about auditing together of course i have to ask you if you haven't already press the subscribe button really appreciate a thumbs up and of course i want everybody to stay safe stay well and i'll see you next time