Audit of SHE (Part 2)

SHE Section Audit Procedures

Examine the Articles of Incorporation, Bylaws,
Ordinary Shares Minutes of Meeting (held monthly or as needed) of
the company.
-Authorization is commonly discussed in the
Preferred Shares Minutes of Meeting
Share Premium (Who holds the Stock Transfer Books?)
- Internal (Examine the STB);
Subscribed Share Capital - External (Confirmation)
Beginning (PY) + Net Income – Dividends
Retained Earnings - Dividends: Authorization – Examine bank transfers
or statements or Cancelled Checks (to check if paid)
Net Income (Proforma)
Audit of AR; (PSA: Significant Risk)
Revenue XX Audit of Inventory/ies
Cost of Sales (XX)
Gross Profit Selling and Admin. Expense
XX
- w/ Invoice
Operating Expenses (XX) - Depreciation (Audit of PPE)
Risk Assessment: less than high
Operating Income XX
a.) Create lead schedule for OpEx
Non-operating Income XX b.) Perform scoping
(individual OpEx vs. Performance Materiality)
Non-Operating Expenses (XX)
Income Before Interest and Taxes (EBIT) XX
Interest Expenses (XX)
Earnings Before Tax (EBT) XX
Tax (XX)
Net Income XX
Example of Scoping
Invoice Perf. Materiality: 750,000.00
Applicable to: OPEX/NOE/NOI In Out
Supplies Expense 550,000.00 ✓* ✓
Advertising Expense 1,500,000.00 ✓
Fuel & Oil 230,000.00 ✓
Salaries 5,430,000.00 ✓ Please refer to Payroll Testing
Depreciation 2,450,000.00 ✓ Please refer to Depreciation Testing
Utilities 2,120,000.00 ✓

Salaries and Depreciation shall be done separately (PT and DT).

Supplies Expense, Advertising Expense, and Utilities Expense shall be tested thru
the request of invoices.

As per Individual line item, Supplies Expense and Fuel & Oil should be Scope
OUT. BUT as per aggregate amount (780,000 vs. 750,000) - *Supplies Expense
(HIGHER) should be tested.