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Chapter 11
Case Studies
Case study 1
What assertions are the directors implying in stating the HP debtors
at £4.6m?
What possible misstatements could occur?
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(c) What varieties of evidence may be collected re this current
asset? and (d) What basic techniques for collecting evidence can be
applied to this item?
Case study 2
What are the assertions relevant to these matters?
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What FRS’s and/or IAS’s are relevant here?
What kind of evidence might be collected?
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Case Study 3
Draw up the terms of reference for the expert
Draft a checklist to examine the expert’s report as audit evidence
This will be based on the answer to the first part e.g.
Is expert suitably qualified? YES/NO
Has expert subjected paintings to scientific test? YES/NO
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Has expert been able to carry out comparison tests with known
etc….
What should the auditor do in cases of doubt about the valuation of
the paintings amounting to £1.3 m?
Examination question
DonkeyAid
Key answer tips
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Questions on charities or not for profit organisations have one common
factor. In most of them, the key issue will be a lack of segregation of duties,
which has impacts on all the systems in the charity. This is the case here.
System weaknesses
This charity has typical weaknesses that are a result of inadequate
segregation of duties. Such organisations often rely on a small number of
dedicated staff who perform all of the accounting functions. Mrs Wimble deals
with all aspects of cash received and also prepares the accounting records
providing ample opportunity for fraud. Supervision by the director may help
to alleviate these weaknesses but additional staff are often beyond the
resources of charities such as DonkeyAid.
If budgets are prepared these should be compared with actual results by the
management committee.
The recommendations made below are often lacking in such organisations.
(a) Gift Aid Declarations [GADs]
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