Business
No. Info Audit Risks Audit Procedures
Event/Transaction
1. Revenue
1. Debtor
Increase in debtor overstatement
Increase in Debtors / confirmations
1. balances or 2. Misstatement of bad
Disputes 2. Aging analysis
customer disputes. debt provisions
3. Cut‐off testing
3. Fraud risk
1. Understatement of 1. Supplier
Reduction in liabilities confirmations
2. Decrease in Creditors accounts payable 2. Cut‐off errors 2. Reconciliation
balances. 3. Misclassification 3. Payment review
4. Potential fraud 4. Cut‐off testing
1. Review
1. Understated warranty
Extended warranty cost
provisions
warranty period or estimates
Warranty Increase / 2. Revenue recognition
3. increased 2. Inspect legal
Customer Complaints issues
customer correspondence
3. Contingent liability
complaints. 3. Verify proper
risks
disclosures
1. Impairment
1. Asset impairment risk testing
Factory shutdown 2. Misclassification of 2. Physical asset
impacting asset disposed assets verification
4. Closure of a Factory
use and 3. Potential 3. Review asset
operations. legal/environmental reclassification &
liabilities legal
contingencies
1. Verify IAS 38
1. Incorrect criteria
capitalization of 2. Review
Capitalization of ineligible costs supporting
Development Cost
5. development 2. Overstatement of invoices &
Recognized
costs. intangible assets contracts
3. Delayed impairment 3. Assess
recognition impairment testing
procedures
1. Cut‐off testing
1. Revenue misstatement 2. Analytical
2. Fraudulent recognition procedures
Reduction in sales
6. Decline in Sales 3. Inventory 3. Customer
revenue.
overstatement confirmations
4. Going concern issues 4. Inventory
valuation review
7. Legal Action on Copyright Litigation due to 1. Understated 1. Obtain legal
Infringement copyright contingent liabilities confirmations
infringement 2. Misclassified legal 2. Review prior
Business
No. Info Audit Risks Audit Procedures
Event/Transaction
audit/legal
risks opinions
issues. 3. Financial & 3. Evaluate
reputational loss provisions &
disclosures
1. Reconcile
foreign currency
1. FX fluctuation risk
transactions
Transactions 2. Import valuation
2. Test hedging
involving foreign errors
8. Imports & Exports instruments
currencies & 3. Regulatory non‐
3. Review
cross‐border trade. compliance
customs
4. Transfer pricing issues
documentation &
related contracts
1. Review
purchase/sale
1. Misvaluation of assets
documents
2. Incorrect depreciation
2. Recalculate
Acquisition / Disposal of Purchase or sale 3. Impairment risk
9. depreciation
Fixed Assets of fixed assets. 4. Misclassification
3. Inspect
between capital &
valuation reports
revenue expenditure
4. Verify proper
classification
1. Examine board
1. Non‐compliance
minutes
2. Inconsistent
Changes in 2. Review
application
New Accounting / accounting comparative
10. 3. Inadequate disclosures
Regulatory Changes policies or new adjustments
4. Issues with
legal regulations. 3. Evaluate
retrospective
disclosures per
adjustments
IAS 8
1. Verify
classification as
1. Misclassification of unearned revenue
Receipt of income liabilities & assets or prepaid
Income Received / Expense before earning it 2. Revenue recognition expenses
11.
Paid in Advance & prepayment of errors 2. Perform cut‐off
expenses. 3. Improper expense testing
amortization 3. Review
amortization
schedules
12. Revaluation Reassessment of 1. 1. Review
asset values (e.g., Overstated/understated independent
PPE or asset values valuation reports
Business
No. Info Audit Risks Audit Procedures
Event/Transaction
2. Incorrect depreciation 2. Recalculate
recalculations depreciation
intangibles). 3. Inconsistent 3. Check
application of valuation disclosure
policies adequacy
1. Perform cut‐off
1. Potential fraud
testing
2. Channel stuffing
2. Trend analysis
A sudden surge in 3. Premature revenue
13. Unusual Growth in Sales 3. Verify customer
sales figures. recognition
orders &
4. Misstatement of
shipments
performance
4. Review returns
1. Trend &
Complex Inventory & analytical review
Various issues
Financial Issues 1. Margin pressure 2. Physical
affecting
(Multiple factors: production 2. Inventory inventory counts
inventory
cost changes, demand shifts, misstatement 3. Impairment
valuation,
14. product launches, 3. Increased risk of fraud testing
operational
damaged/long-standing/tech- 4. Weak controls 4. Evaluation of
efficiency &
based inventory, turnover 5. Liquidity & going internal controls &
financial
changes, returns, staffing, IT concern risks IT systems
performance.
changes, liquidity, loss) 5. Liquidity
analysis
