Small and Medium - Sized Entities

Audit Manual

Volume 3 – Small and Medium - Sized Entities

Audit Templates (SMET)

The Institute of Chartered Accountants of Sri Lanka

30 A Malalasekera Mawatha
Colombo 7

Telephone: 2352000
Fax: 2352067

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Disclaimer
SMET is designed to assist practitioners in the implementation of the Sri Lanka Auditing
Standards (SLAuS) on the audit of small- and medium-sized entities, but is not intended to be a
substitute for the SLAuSs themselves. Furthermore, a practitioner should utilize SMET in light of
his/her professional judgment and the facts and circumstances involved in each particular audit.
CA Sri Lanka disclaims any responsibility or liability that may occur, directly or indirectly, as a
consequence of the use and application of this SMET.

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Preface

The Primary objective of the Small- and Medium-Sized Entity Audit Templates (SMET) is to support
SMPs to document of audit work that provide;

• A sufficient and appropriate record of the basis for the auditor’s report; and
• Evidence that the audit was planned and performed in accordance with Sri Lanka Auditing
Standards and applicable legal and regulatory requirements.

SMET are derived using the “CA Sri Lanka Audit Manual” and applying the “Three step Risk based
audit process’ referred to this Audit Manual (Refer CA Sri Lanka Audit Manual – Volume 1, page 29).
The templates have been organized is in compliance with Sri Lanka Auditing Standards.

Applicability and Criteria for use

An accounting practice/firm that has following characteristics is considered a SMP.

• Its clients are mostly small and medium sized entities (SMEs).
• External sources are used to supplement limited in-house technical resources.
• It employs a limited number of professional staff.

The SMET is recommended for use on audit engagements where all of the following criteria are met.

1) There is a concentration of ownership and management in a small number of individuals.

2) The entity has few sources of income.
3) The entity has non-complex record-keeping.
4) The nature of the entity’s business has not, and is not expected to, change significantly.
5) The entity is non-regulated, non listed Company (Not a “PLC”) and a Specific Business Entity
(SBE) which complies with Sri Lanka Accounting Standard for SMEs.

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Three Step “Risk Based” Audit Process

(Reference: CA Sri Lanka Audit Manual - Volume 1, Page 29)

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Small and Medium - Sized Entities – Audit Manual
Volume 3 – Small and Medium - Sized Entities Audit Templates (SMET)

Index of Templates
Key Phase Related Activities Documentation (Templates)

SMET – Eligibility Criteria

SMET 01 – Audit Client and Engagement Acceptance/
Continuance Form
SMET 02 – Audit Engagement Letter Template
Plan the audit SMET 03 – Overall Audit Strategy Template
SMET 04 – Analysis of Financial and Non-Financial
Information (Planning Stage)
SMET 05 – Time Budget and Work Allocation Template
SMET 06 – Materiality Level Computation Template
SMET 07 – Business and Fraud Risk Assessment Template
Risk
Assessment SMET 08 to 12 – Understand and document Significant
Business Processes, Perform Walkthroughs and Test of
Controls (Cash Receipts, Cash Payments, Sales and Trade
receivables, Purchase and Trade payable, Payroll)
Perform risk
assessment
Supplement 1 – Minimum Sample Size for TOC
procedures
SMET 13-15 – Understand and document Significant
Business Processes (Accounting estimates, Related Party and
Financial statement close process)
SMET 16 – Risk of Material Misstatement Assessment Form
(RMM Form)
Design further audit SMET 17 – Detail Audit Plan (Audit Programs for significant
procedures account balances)
SMET 18 – Summary of Un-corrected Misstatement Schedule
Risk (For significant account balances)
Response Perform further audit SMET 19 – Lead Schedules (For significant account
procedures balances)
SMET 20 – Management Representation Letter Template
SMET 21 – Other Audit Procedures Template

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 Evaluate the audit SMET 22 – Significant Audit Findings Template
evidence obtained SMET 04 – Analysis of Financial and Non-Financial
Information (Completion stage)
Reporting SMET 24 – Management Letter Comments Template
Prepare the auditor’s
report

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Acronyms used
SMP – Small and Medium Practitioners
SME – Small and Medium-sized Entities
SMET – Small and Medium-sized Entity Audit Templates
CA Sri Lanka – The Institute of Chartered Accountants of Sri Lanka
OM – Overall Materiality
PM – Performance Materiality
SBPs – Significant Business Processes
RMM – Risk of material misstatement
TCWG – Those Charged with Governance

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 CA Sri Lanka Audit Manual, Volume 3 - SMET

SMET- Eligibility Criteria

Company Name:

Reporting Period:
If the answer is “No” to one or more of these criteria, SMET is not recommended to be used for the engagement. Refer
to the additional information provided for each criterion to assist in your evaluation.

Yes No
1) There is a concentration of ownership and management in a small number of individuals.
A small business ordinarily has only a few owners; often just a single proprietor. SMET
may be applied to subsidiaries or branches of multinational entities with the approval of
the Primary Team.
2) The entity has few sources of income.
A small business typically has a limited range of products or services and operates from a
single or limited number of locations. Small businesses typically do not have a high volume
of transactions.
3) The entity has non-complex record-keeping.
A small business typically has non-complex systems, with one or only a few individuals
responsible for processing transactions. These entities often use a branded accounting
software package running on a single desktop computer or small local area network.
SMET assumes a simple (i.e. non-complex) IT environment. If SMP believe the IT
environment may be more complex, SMP should not respond to this criterion unless they
have first assessed complexity by answering the questions in the “Understand the IT
Environment” in SMET 3 – Overall Audit Strategy Template.
4) The nature of the entity’s business has not, and is not expected to, change significantly.
A small business often operates in a relatively stable business environment (e.g., a small
manufacturing entity with an established market niche that is expected to be maintained for
the foreseeable future). An entity may operate in a dynamic industry (e.g., technology) but
the nature of its business is not expected to change significantly, other than occasional
refinements of its business plan or strategies as a reaction to current market forces. In this
case, the engagement would satisfy this criterion provided that the other criteria are met
and minimal effort is needed to understand the business and identify potential business or
financial statement risks.
5) The entity is non-regulated, non listed Company (Not a “PLC”) and a Specific Business
Entity (SBE) which complies with Sri Lanka Accounting Standard for SMEs.

Approval for use of the SMET

I have reviewed the responses to the criteria, and approve the use of the SMET on this engagement.

Approved by

Engagement Partner:

Date:
Note: Sign-off by the individuals preparing (or updating) and reviewing the information contained within the SMET
indicate that all information being carried forward has been re-challenged, particularly for changes in risk assessments
and resulting audit program procedures.

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SMET 1: Audit Client and Engagement

Acceptance/Continuance Form

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(Reference: CA Sri Lanka Audit Manual - Volume 2, Page 25)
This form should be completed at the following stages;
• When accepting a new client – At proposal stage
• When continuing an existing client to the next year – In the current year after sending the audit
report.

1. Client Information
1.1 Registered Name:

1.2 Address:

1.3 Company Registration No:

1.4 Legal form of the business

Private Limited Liability Company registered Partnership
under Company’s Act No.7 of 2007

Limited Liability Company (other than Listed) Other (Describe)

registered under Company’s Act No.7 of 2007

1.5 Client Contacts/Key Client Personnel

Contact Name Position Telephone Number

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1.6 Ownership Lists
Major
Officer Director Percentage
Name Shareholder Other information
Yes/No Yes/No ownership
Yes/No

1.6.1 Is there any public information available against the Company and Directors?
Yes No
If yes, Please provide details

1.7 Organization Structure and Brief Description of the Business (e.g. industry, products or
services, major customers, major suppliers):

1.8 Is the business currently in the start-up phase (i.e. started within the past 5 years)?
Yes No
If yes, indicate the year:

1.9 Financial Information (for the last three years)

1.9.1 Is financial statement information available for all of the last three years?
Yes No
If no, explain why.

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1.10 Other Information (e.g. information with regard to the client that may assist in our client and
engagement acceptance continuance)

2. Engagement Information
2.1 Financial periods covered by the statutory audit:

2.2 Scoping of the Audit Engagement

11 Assessment Comments
Inquiry
What is the nature and scope of the audit?

What accounting framework will be used?

What is the deadline (if any) for completing the

audit?

2.2.1 Does the parent company of the client, or any company in whose consolidated financial
statements the client is included, have publicly traded debt or equity securities?
Yes No

If yes, specify the full names of the companies: (Also attach “Organizational Chart” as
an appendix to this SMET)

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2.2.2 Has management or those charged with governance imposed any type of limitation on
the scope of the audit? (This could include unrealistic deadlines, not accepting certain firm’s
staff to perform the work, and denial of access to a facility, key personnel, or relevant
documents. If such a limitation would result in a disclaimer of opinion, the firm should decline
the engagement, unless the firm is required by law or regulation to proceed with the
engagement)
Yes No
If yes, specify:

2.3 Are there any industry-specific accounting practices or principles that need to be considered?
Yes No
If yes, briefly describe.

2.4 Key Client Service Team

Engagement Partner

Engagement Manager

Engagement Quality Review Partner (If

required)

3. Evaluation of Independence and Conflicts of interest

3.1 Is the client already a client of the firm?

Yes No

If yes identify the types of services provided at present?

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3.2 Review of independence in compliance with Company’s Act No.7 of 2007 – Sec. 157. (3) (4) at
present or within last two years

3.2.1
Has any Partner/Partners of the firm held any of the following positions in Yes No
the Company?

a) A Director or Employee of the Company

b) A person who is a partner or in the employment of a director or
employee of the company
c) A liquidator or an administrator or a person who is a receiver in respect
of the property of the company
d) Is not a Director or employee, a Partner or in the employment of a
Director or employee, a liquidator or an administrator or a person who
is a receiver in respect of the property
(Please note that a “Yes” answer to the above may result in the firm not being able to accept the audit
engagement)

Nature of the relationship

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3.2.2 If the answer to of above is “Yes”, Please state the period of relationship
Period

Eg. Director or Employee

3.3 Will the above relationship preclude the firm from accepting the audit?
Yes No
If No, identify the reason for the conclusion

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4 Predecessor Auditor
4.1 Is there an external predecessor auditor?
Yes No
If yes, answer questions 4.2 and 4.3

4.2 Firm name and office :

4.3 Have we written to the predecessor auditor requesting for audit clearance?
Yes No
Date request sent:

4.3.1 Have we received clearance from the predecessor auditor to accept the assignment?
Yes No
(Obtaining clearance from the predecessor auditor is a requirement of CA Sri Lanka. A member
is in violation of the CA Sri Lanka Code if this process is not followed)
Date request
sent:

4.3.2 Is there any reason given by the predecessor auditor that prevents us from accepting the
assignment?
Yes No

4.3.3 Why the client has decided to change the auditor?

4.4.4 Based on the above conclude on the reason for accepting/declining the engagement

5 Audit Opinion
5.1 Type of opinion issued last year?
Unqualified Adverse
Qualified Disclaimer
If Qualified, Adverse or Disclaimer to Question 5.1, the engagement is presumptively greater than low
risk.

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5.2 Did the prior year audit opinion include a going concern modification?
Yes No
If you answered Yes to Question 5.2, the engagement is presumptively greater than low risk.

5.3 Was the prior year auditor's opinion modified in any other way?
Yes No
If yes, describe the modification:

If you answered Yes to Question 5.3, the engagement is presumptively greater than low risk.

6 Other Significant Considerations

6.1 Will the engagement require specialized (e.g., industry-specific) knowledge and experience not
now available in practice?
Yes No
If yes, describe the plan to obtain necessary expertise from other offices and/or to develop it
within the office. Explain or attach a memorandum.
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6.2 Are there any other factors that should be considered in evaluating the prospective client?
Yes No
If yes, explain or attach a memorandum.

7 Preparer's Sign Off

I have completed the audit client and engagement acceptance/continuance from for this client
and to the best of my knowledge all of the information is accurate.
Based on my assessment, the overall risk designation is (Low/Moderate/High)
Based on my assessment we should/should not accept the client /engagement

Comments on risk designation and overall conclusion:

Preparer's Title:

Preparer's Signature:

Date:

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8 Conclusions on Client and Engagement Acceptance/Continuance

8.1 Anticipated Engagement Service Partner

I have considered the integrity of management, the risks (monetary and reputation) to the firm,
the ability of the firm to provide quality services, and the professional, business and economic
factors regarding this engagement and recommend that the firm should accept/continue this
client and engagement?
Yes No
If No state below the rational for not acception/continuions client/engagement

Engagement Service Partner Signature:

Date:

8.2 Declaration- Other Partners

I am satisfied that this recommendation is in compliance with the firm's policy on client
acceptance/ continuance and I concur with the acceptance/continuance of this prospective client
and the risk rating assigned.
Yes No
If No, give reasons below

Signature of Partner 1: Date:

[Name of the Partner 1]

Signature of Partner 2: Date:

[Name of the Partner 2]

Signature of Partner 3: Date:

[Name of the Partner 3]

Signature of Partner 4: Date:

[Name of the Partner 4]

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SMET 2: Audit Engagement Letter Template

[Firm’s letterhead]

[Date]

[Key client personnel and business address]

Dear Mr/Mrs

[Name of the Client]: Audit Engagement Letter

You have requested that we audit the financial statements of [Name of the client] which comprise
the statement of financial position as at [year end], and the statement of comprehensive income,
statement of changes in equity and statement of cash-flow for the year then ended, and a summary of
significant accounting policies and other explanatory information. We are pleased to confirm our
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acceptance and our understanding of this audit engagement by means of this letter. Our audit will be
conducted with the objective of our expressing an opinion on the financial statements.

Our Responsibilities and Limitations

The objective of our audit is to express an opinion on whether the Company financial statements
give a true and fair view of (or present fairly, in all material respects), the financial position, results
of operations and cash flows of [Name of the Client] in accordance with [Sri Lanka Accounting
Standards or Sri Lanka Accounting Standard for Small-and Medium-sized Entities] (Use as
appropriate).
We will conduct our audit in accordance with Sri Lanka Auditing Standards (SLAuS) and CA Sri
Lankas Code of Ethics for Professional Accountants (Code) issued by the Institute of Chartered
Accountants of Sri Lanka. Those standards require that we comply with ethical requirements and
plan and perform the audit to obtain reasonable assurance about whether the financial statements are
free from material misstatement. An audit involves performing procedures to obtain audit evidence
about the amounts and disclosures in the financial statements. The procedures selected depend on the
auditor's judgment, including the assessment of the risks of material misstatement of the financial
statements, whether due to fraud or error. An audit also includes evaluating the appropriateness of
accounting policies used and the reasonableness of accounting estimates made by management, as
well as evaluating the overall presentation of the financial statements.
Because of the inherent limitations of an audit, together with the inherent limitations of internal
control, there is an unavoidable risk that some material misstatements may not be detected, even
though the audit is properly planned and performed in accordance with SLAuS.
In making our risk assessments, we consider internal control relevant to the entity’s preparation of
the financial statements in order to design audit procedures that are appropriate in the circumstances,
but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control.
However, we will communicate to you in writing any significant deficiencies in internal control
relevant to the audit of the financial statements that we have identified during the audit.

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Management’s Responsibility
Our audit will be conducted on the basis that management and those charged with governance
acknowledge and understand that they have responsibility:
(a) For the preparation and fair presentation of the financial statements in accordance with Sri
Lanka Accounting Standards and the requirements of the Companies Act No.7 of 2007.
(b) For such internal control as management determines is necessary to enable the preparation of
financial statements that are free from material misstatement, whether due to fraud or error;
and
(c) To provide us with:
i. Access to all information of which you are aware that is relevant to the preparation of
the financial statements such as records, documentation and other matters;
ii. Additional information that we may request from you for the purpose of the audit; and
iii. Unrestricted access to persons within the company from whom we determine it
necessary to obtain audit evidence.

The directors are responsible for safeguarding the company’s assets and for the prevention and
detection of fraud, error and non-compliance with regulatory requirements.

Our audit procedures are designed to provide reasonable assurance that there are no undetected errors
or irregularities, including fraud and other illegal acts, material to the financial report. There is an
unavoidable risk that audits planned and executed in accordance with SLAuS may not detect a
material error or irregularity, particularly where there has been concealment through collusion,
forgery and other illegal acts. As audit testing is based on samples it may not result in errors and
irregularities being detected. Our audit can only provide reasonable, not absolute, assurance that the
financial report is free of material misstatement.
As part of our audit process, we will request from management and, where appropriate, those
charged with governance written confirmation concerning representations made to us in connection
with the audit.
We look forward to full cooperation from your staff during our audit.

Documents accompanying the audited financial report

Sri Lanka Auditing Standards (SLAuS) require that we read any annual report and any other
documents that contain our audit opinion. The purpose of this procedure is to consider whether other
information in this document, including the manner of its presentation, is materially inconsistent with
information appearing in the audited financial report. We assume no obligation to perform
procedures to corroborate such other information as part of our audit

Quality Control

The conduct of our audit in accordance with Sri Lanka Auditing Standards means that information
acquired by us in the course of our audit is subject to strict confidentiality requirements. Information
will not be disclosed by us to other parties except as required or allowed for by law or professional
standards, or with your express consent. Our audit files may, however, be subject to review as part
of the quality control review program of CA Sri Lanka/SLAASMB which monitors compliance with
professional standards by its members.

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We advise you that by signing this letter you acknowledge that, if requested, our audit files relating
to the audit will be made available under the review programs outlined above. The same strict
confidentiality requirements apply under these programs as apply to us as your auditor.

Internet communication
During the engagement, we may from time to time communicate with the company electronically.
We will take all necessary procedures to ensure integrity of such information shared with us.
However, the electronic transmission of information cannot be guaranteed to be secure, error free or
virus free and such information could be intercepted, corrupted, lost, destroyed, arrive late or
incomplete or otherwise be adversely affected or unsafe for use. We shall not have any liability of
whatsoever nature to the company arising from or in connection with electronic transfer of
communication and information to the company.

Fees
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Our fees, which will be billed as work progresses, are based on the time required by the individuals
assigned to the engagement plus out-of-pocket expenses. Individual hourly rates vary according to
the degree of responsibility involved and the experience and skill required.

This letter will be effective for future periods unless it is terminated, amended, or superseded.

Please sign and return the attached copy of this letter to indicate your acknowledgement of, and
agreement with, the arrangements for our audit of the financial statements.

Yours truly,

[Name of the Engagement Partner]

[Name of the firm]

Acknowledgement on behalf of [Name of the Client] by

[Name of the key Client personnel, Designation and Date]

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Note:

1) Two copies of this letter should be signed. One copy to be retained by the client and the other
copy by the auditor.
2) The auditor is required to evaluate annually whether there are significant changes that would
require the letter to be re-issued. This letter should be filed in the permanent file and retained till
superseded.
3) This is a standard letter for an audit engagement which should be customized by the engagement
team as appropriate if required. This letter should be customized on the scope of the engagement
accepted by the firm.

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SMET 3: Overall Audit Strategy Template

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(Reference: CA Sri Lanka Audit Manual- Volume 2, Page 43)

Company Name:

Reporting Period:

Audit Scope

Describe scope of
services
Statutory audit Reporting to parent Management Other
report company letter (specify):
Reporting requirement

Significant reporting

SLFRSs – SLFRS/LKAS SLFRSs – SLFRS/LKAS

Reporting framework SLFRS for SMEs SLFRS for SMEs

Group Reporting Policy

Client and Engagement Risk designation as Low Reasons for Risk ratings :
Acceptance/Continuance Moderate
High

Engagement Letter Date:……………………………………..

Engagement letter signed by client

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Brief Description of the Client’s Business (Including significant changes during the reporting
period)

Provide a brief description of the client’s business, including its principal activities, main products and
services, the industry in which it operates, and the key market forces and environmental factors
affecting the entity

Overall analysis of financial and non-financial information

Based on the analysis done in SMET- 4 Analysis of financial and non-financial information identifies significant
variations or unexpected relationships.

Determine the Complexity of the IT Environment

“No” responses to the following questions generally indicate a low level of complexity. Any “Yes” responses
may be indicative of a more complex environment, which generally will require more extensive documentation.
The engagement team should discuss any concerns about the complexity of the IT environment with an IT
professional.

Yes No
Has the client modified its purchased (“off-the-shelf”) accounting software or
has it internally developed any of its important software applications?
Does the purchased software allow employees to make (and do they have the
technical skills to make) changes to the programs?

Does the client use more than one computing platform to process accounting
and/or business information?

Does any member of management devote significant time to or have full-time

responsibility for the IT environment?

Is electronic commerce a significant part of the client’s business (e.g., extensive

use of the Internet for initiating or processing transactions, or extensive use of
telecommunications links)?

Is the business significantly dependent on its information systems (i.e., business

would be severely slowed or halted if the systems were down for an extended
period)?

Would the audit require services of an IT professional?

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Summary of significant issues discussed with client

State the date of meeting and names of client officers and firm representation presenters

Assessment of risk of material misstatement in the financial statements

Based on the detail analysis in “SMET 07 business and fraud risk assessment”, identify significant risks and the
related risk response (Identity Changes in the control environment, Fraud that has been perpetrated or any alleged
or suspected fraud, including allegations of fraudulent financial reporting and management’s assessment of the
risk of material misstatement due to fraud)

Significant Risk Related Significant accounts Risk Response

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Other audit or accounting issues

Comments
New/changed accounting standards or internal
accounting policies
New important contracts, agreements, etc.

Significant transactions outside the course of

normal business
Revenue recognition

Outcome of prior period estimates

New accounting estimates

Any additional matters

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Determine Overall Materiality and Performance Materiality

Detail computation for determining overall materiality could be documented if needed in “SMET 06 – Materiality
Computation Template”. Document rationale for the basis used for establishing Overall Materiality/Performance
Materiality and the factors considered when determining the percentage applied.

Amount Basis

Overall Materiality (OM) %

Rationale for OM
Performance Materiality (PM) %

Rationale for PM

Brief Description of our Overall Audit Strategy

Our overall strategy might include a brief discussion of

a) Significant audit issues or areas of focus noted and are planned procedures in these areas.
b) Engagement staffing, including the need for specialists
c) Other matters deemed important to the audit

Approval and sign off:

Audit Supervisor:
(As the preparer) Date:

Other team member 1: Date:

Date:
Other team member 2:

Engagement Manager: Date:

(As the 1st reviewer)

Engagement Partner: Date:

(As the 2nd reviewer)

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SMET 4: Analysis of Financial and Non-Financial Information

Statement of Comprehensive Income
Company Name:

Reporting Period:

200X
200X Change % Change
[Previous
[Current Year] (A-B=C) (C/B*100=D)
Year]
(A) (C) (D)
(B)
Revenue
Cost of Sales
Gross Profit
Gross Profit %

Selling and Distribution Costs

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Administrative Expenses

Other Operating Income

Other Expenses

Profit Before Tax

Tax Expenses

Profit After Tax

Comments for significant variances noted:

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Statement of Financial Position

Company Name:

Reporting Period:

200X 200X Change % Change

[Current [Previous (A-B=C) (C/B*100=D)
Year] Year]
(A) (B) (C) (D)
Non Current Assets
Property, plant and Equipment
Intangible Assets

Current Assets
Inventory
Trade and other receivables
Other short term financial assets
Cash and cash equivalents

Total Assets

Equity
Stated Capital
Retained Earnings
Other Reserves

Non Current Liabilities

Borrowings
Deferred tax liabilities

Current liabilities
Trade and other payables
Borrowings – Current portion
Tax liabilities
Provisions
Other short term financial liabilities

Total Equity and Liabilities

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Comments for significant variances noted:

Key Financial Ratios

200X 200X

Key Ratios Formula [Current Year] [Previous Year]

Trade receivable Days

Inventory Days 27
Trade payable Days

Return on capital employed

Return on total assets

Current Ratio

Solvency test ratio -

Se.57(1)(b) of Companies
Act no.7 of 2007 (Going
concern considerations)
[Other]

Comments

Prepared by: Date:

Reviewed by: Date:

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SMET 5: Time Budget and Work Allocation Template

Company Name:

Reporting Period:

Cost – Staff 1 Cost – Staff 2 Total Cost

(Rs) (Rs) (Rs)

Risk Assessment
Risk Response
Reporting

Total Staff Hours

Engagement Manager*

Other Members (Eg.Tax Expert)*

Engagement Partner*

Engagement Quality Reviewer

(If required)*

Total Budgeted Cost (A)

CY Audit Fee (B)

Margin [(B-A)/A]

*Total Hours @ Rate per Hour

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Over/
Related Staff Staff Total Total (Under)
Objective/Procedure SMET 1 2 Budget Actual Budget
RISK ASSESSMENT
Preliminary Activities
Engagement Acceptance and Continuance
Letter of Engagement

Planning the Audit

Develop Overall Audit Strategy
Determine Materiality
Audit Team Discussion

Perform Risk Assessment Procedures

Identify Significant Risk Factors
Understanding Internal Controls - At Entity
Level
Understanding Internal Controls - At
Transactions Level
Evaluating Internal Control - At Entity Level
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Evaluating Internal Control - At
Transactions Level
A. Cash receipts
B. Cash Payments
C. Sales and Trade Receivables
D. Purchase and Trade Payables
E. Payroll
F. Financial Statement Close Process
G. Accounting Estimates
H. Related Party

Assess Risk of Material Misstatements (RMM)

Supervise and Review Planning Activities

Total Hours
Rate per Hour
Total Cost
RISK RESPONSE
Design Detail Audit Plan
Perform Test of Controls
A. Cash receipts
B. Cash Payments
C. Sales and Trade Receivables
D. Purchase and Trade Payables
E. Payroll
F. Financial Statement Close Process

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Perform Substantive Audit Procedures

Property, Plant, Equipment and Investment
Property
Intangible Assets
Investments in group companies, associated
undertakings and joint ventures
Other Investments and Derivatives
Inventories
Trade and Other Receivables
Bank Balance and Cash
Equity
Long term Loans
Trade and Other Payables
Taxation
Provisions for liabilities and charges,
contingent liabilities and financial
commitments

Perform other Audit Procedures

Obtain Management Representation
Review & Supervision of Substantive Audit
Procedures

Total Hours
Rate per Hour
Total Cost

REPORTING
Evaluate audit Evidence - Summary of
Significant Findings
Perform Overall Financial Statement
Review Procedures
Prepare Summary of Uncorrected
Misstatements
Communicate Audit Results with TCWG
Prepare Audit Report
Identify Management Letter Points and
Prepare Management Letter
Review & Supervision of Reporting Work

Archive the Engagement

Total Hours
Rate per Hour
Total Cost

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 CA Sri Lanka Audit Manual, Volume 3 - SMET

SMET 6 - Materiality Computation Template

Company Name:

Reporting Period:

(Use the below path as a guidance to calculate overall materiality. The path should be selected after concluding
on the intended user and their consideration/s)

Qualitative Considerations

Continuing Profits - Operating results inappropriate

- Operating Losses
- Financial Problems

Operating Results
(Statement of Comprehensive Income) 31 Statement of Financial Position

Reasonable Margin - Break Even Increasing Diminishing

- Fluctuating results Equity Equity

Profit before tax Sales Shareholders Funds Total Assets

(Net Assets)

3% 7% 1% 3% 3% 5% 1% 3%
Public Private Public Private Public Private Public Private

Summary of Materiality Computation

Basis Selected - Rationale for selected basis
200X (Planning and completion
stage)
(Rs.)
Planning Stage
Overall Materiality (OM)
Completion Stage

Performance Materiality (PM) Planning Stage

(60% - 85% of OM) Completion Stage

Prepared by: Date:

Reviewed by: Date:

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 CA Sri Lanka Audit Manual, Volume 3 - SMET

SMET 7: Business and Fraud Risk Assessment Template

Company Name:

Reporting Period:

(Reference: CA Sri Lanka Audit Manual- Volume 2, Page 80 and 81)

• This template is used to assess overall internal controls and to identify significant risks, including fraud
risks.
• Assessment of overall Internal Controls in an entity is carried out using a sample of common questions.
The team should add any other factors that they feel are important in assessing overall internal control
environment and identifying significant risks.
• Auditor should use Professional judgment to assess inherent risk as high or moderate or low and also to
identify any significant risks.

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 CA Sri Lanka Audit Manual, Volume 3 - SMET

Assessment of overall internal controls

1. Control Environment
1.1 Communication and enforcement of integrity and ethical values
Inherent Risk Significant Risk?

Yes/No Related factor Low Moderate High Yes No

Policies regarding the client’s values and

behavioral standards and codes of conduct (written
or adequately communicated via other means)
Effective means of communicating and supporting
the client’s values or ethics.
Management is of high integrity based on past
experience and our current knowledge
Management and/or key executives lead by
example
[Other matters] 33
1.2 Participation by those charged with governance
Inherent Risk Significant
Risk?
Yes/No Related factor
Low Moderate High Yes No

Adequate communications among those charged

with governance, and external auditors(and internal
auditors if applicable)
Those charged with governance are sufficiently
independent of management.
Adequate number of meetings, or the matters
discussed are appropriate.
Those charged with governance adequately
scrutinize activities, e.g., difficult questions are
raised and pursued with management.
Those charged with governance are adequately
involved in financial reporting process.
Size and composition of the board or those charged
with governance is appropriate given the company’s
industry and stage of growth.
[Other matters]

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 CA Sri Lanka Audit Manual, Volume 3 - SMET
1.3 Management philosophy and operating style
Inherent Risk Significant
Related factor Risk?
Yes/No Low Moderate High Yes No
Domination of management by one or a few
individuals with effective oversight by those
charged with governance
Entrepreneur and /or management has a proven
track record in this or other business
Non-financial management’s excessive
participation in, or preoccupation with, the
selection of accounting principles or the
determination of significant estimates.
Management’s is interested in maintaining or
increasing the company’s earnings trend.
There are conditions (external or internal) that
might create pressure on management to adopt
an unduly aggressive financial reporting bias
(e.g., maximize income or earnings growth,
smooth reported earnings, minimize taxable
income)
Management gives appropriate attention to
internal control, including the effects of
information system processing.
Management does not correct known reportable
conditions on timely basis.
Management sets unduly aggressive financial
targets and expectations for operating personnel
A significant portion of compensation is derived
from bonuses, or other incentives, the value of
which is contingent upon the entity achieving
unduly aggressive targets for operating results or
financial position
Personal accounts of entrepreneur and/or key
executives are segregated from those of the
business
Management is aggressive in selecting
accounting principles and determining the
estimates
Management commits to analysts, creditors and
other third parties to achieve what appear to be
unduly aggressive or unrealistic forecasts.
Management consult us on significant matters
relating to internal control and accounting issues
There is a history of statutory law violations or
claims against the client or its entrepreneur/
management alleging fraud or violations of
statutory laws
[Other matters]

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 CA Sri Lanka Audit Manual, Volume 3 - SMET
1.4 Organizational structure and assignment of authority and responsibility
Significant
Inherent Risk
Risk?
Yes/No Related factor
Low Moderate High Yes No
Overall complex organizational structure
involving numerous or unusual legal entities,
managerial lines of authority, or contractual
arrangements without apparent business purpose.
Appropriate management oversight (for example,
adequate supervision or monitoring of accounting
personnel, information system, or remote
locations)
High turnover of senior management.
Appropriate system of authorization and
approval of transactions
Clear assignment of responsibilities, including
those specific to information systems processing
and program development.
Commitment by management to providing
sufficient accounting and financial personnel to
keep pace with the growth of the business
35
If the entity is a subsidiary, division or branch,
the parent company to exercise effective controls
(e.g., standardized financial reporting
requirements, monitoring of reported results,
internal audit visits)
[Other matters]

1.5 Human resources policies and procedures and commitment to competence

Inherent Risk Significant
Related factor Risk?
Yes/No Low Moderate High Yes No
Adequate standards and procedures for hiring,
promoting, compensating or terminating personnel.
Job applicant screening procedures relating to
employees with access to assts susceptible to
misappropriation.
Written job descriptions informing personnel of
their duties (or, in the absence of written
documentation, communication of job
responsibilities and expectations).
Employees with access to cash, securities, and
other valuable assets are not bonded.
[Other matters]

Inherent Risk Assessment (Low/Moderate/High)

(Control Environment)

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2. Risk Assessment
2.1 Information about the entity
Significant
Inherent Risk
Yes/No Related factor Risk?
Low Moderate High Yes No
Unusually rapid growth or unusually high
profitability especially compared with those of
other companies in the same industry.
High degree of competition or market saturation,
accompanied by declining margins.
Declining industry with increasing business
failures.
Rapid changes in industry, such as significant
declines in customer demand, high vulnerability
to rapidly changing technology or rapid product
obsolescence.
[Other matters]

2.2 Operations
Significant
Inherent Risk
Related factor Risk?
Yes/No
Low Moderate High Yes No
Changes in entity’s operating environment.
New personnel in key financial or operating
positions.
New or revamped information systems.
Significant new lines, products, or activities
Significant operations in countries where
business practices are questionable.
Especially high vulnerability to changes in
interest rates.
Small number of transactions that have a
material effect on the client.
High level of sales returns.
Assets are susceptible to misappropriation, such
as large amount of cash or assets easily
convertible into cash; goods in inventory are
small in size, high in value, or high in demand;
fixed assets are small, marketable, or lack
ownership identification.
[Other matters]

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 CA Sri Lanka Audit Manual, Volume 3 - SMET

2.3 Financial Condition

Inherent Risk Significant
Yes/No Related factor Risk?
Low Moderate High Yes No
Threat of imminent bankruptcy or foreclosure.
Severely deteriorating financial condition or liquidity.
Inadequate capital base to be competitive.
Limited access to capital to sustain operations.
Marginal ability to meet debt repayment requirements.
Compliance with restrictive loan covenants is difficult to
maintain.
Inability to generate cash flows from operations while
reporting earnings and earnings growth.
Operating losses or significant deterioration in earnings.
Poor or deteriorating financial position when the
entrepreneur and/ or key executives have personally
guaranteed significant debts of the entity.
[Other matters] 37
2.4 Accounting
Inherent Risk Significant
Related factor Risk?
Yes/No Low Moderate High Yes No
Public criticism or litigation involving
accounting, financial reporting, or business
practices of the client or of companies in one or
more of its industries.
New accounting, statutory, or regulatory
requirements that could impair the financial
stability or profitability of the client.
Adverse consequences on significant pending
transactions, such as business combination or
contract award, if poor financial results are
reported.
Assets. Liabilities, revenues, or expenses are
based on significant estimates that involve
unusually subjective judgments or uncertainties,
or that are subject to potential significant changes
in the near term in a manner that may have a
financially disruptive effect on the client.
An extraordinary volume of shipment shortly Low Moderate High Yes No
before or at year end quarter ends.
Restatement of the prior year’s financial
statements for the correction of an error.
[Other matters]

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2.5 Related Parties

Inherent Risk Significant
Yes/No Related factor Risk?
Low Moderate High Yes No
Significant related party transactions not in the
ordinary course of business or with related entities not
audited or audited by another firm.
Other auditors involved with related entities (or in the
annual audit), or some related entities not audited.
[Other matters]

Inherent Risk Assessment (Low/Moderate/High)

(Risk Assessments)

3. Information system and control activities

Inherent Risk Significant
Related factor Risk?
Yes/No Low Moderate High Yes No
Ability to prepare accurate and timely financial reports,
including interim reports.
Entrepreneur and/or key executives routinely monitor or
review interim financial information (e.g., monthly
financial statements) or arrange for timely investigation
and follow-up on unusual or unexpected variances.
Planning and reporting systems (such as business
planning; budgeting, forecasting) that adequately set
forth management’s plans and the results of actual
performance.
Adequate methods of identifying and communicating
variances from planned performances.
Adequate policies for developing and modifying
accounting systems and controls, including changes to
and use of computer programs and/or data files.
Overall coordination between the accounting and data
processing functions.
Understaffed accounting department, inexperienced or
ineffective accounting personnel, or high turnover.
Timely and appropriate documentation for transactions.
[Other matters]

Inherent Risk Assessment (Low/Moderate/High)

(Information system and control activities)

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 CA Sri Lanka Audit Manual, Volume 3 - SMET

4. Monitoring
Significant
Inherent Risk
Risk?
Yes/No Related factor
Low Moderate High Yes No
Adequate monitoring of the continued functioning of
the significant controls.
Reportable conditions/material weaknesses in internal
controls.
High level of customer complaints
Control-related recommendations from external and/or
internal auditors are ignored.
Entrepreneur/owner/manager actively involved in the
business.
[Other matters]

Inherent Risk Assessment (Low/Moderate/High)

(Monitoring) 39
Overall Inherent Risk Assessment
Internal Control Component Overall Inherent Risk
Low Moderate High
1. The control environment
2. Risk assessment
3. Information system and control activities
4. Monitoring

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 CA Sri Lanka Audit Manual, Volume 3 - SMET

5. Inquiries regarding the risks of material misstatement due to of fraud

Auditors inquire of management (and others, including those charged with governance, unless
all are involved in managing the entity, and internal audit, as appropriate), as to whether they
have knowledge of any actual or suspected fraud.
Auditors also inquire of management about:
• Management’s assessment of the risks of material misstatement due to fraud, including
the nature, extent and frequency of such assessments.
• Management’s process for identifying and responding to risks of fraud in the entity,
including any risks of fraud that have been identified by management or brought to
management’s attention. We pay particular attention to controls designed to identify
fraud or to prevent frauds from occurring.
• Management’s communication, if any, to those charged with governance regarding its
process for identifying and responding to the risk of fraud
• Management’s communication to employees regarding its views on business practices
and ethical behavior.

Name Title Date of inquiries

Matters
discussed:

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 CA Sri Lanka Audit Manual, Volume 3 - SMET

6. Fraud risk factors

Indicate any risk factors for fraudulent financial reporting or the misappropriation of assets.
In the context of the related incentives/pressures, opportunities and attitudes, evaluate the type,
magnitude, likelihood and pervasiveness of the risk to determine whether they represent a risk
of material misstatement due to fraud. Our consideration includes an evaluation of whether the
selection and application of accounting policies, particularly those related to subjective
measurements and complex transactions, may be indicative of fraudulent financial reporting
resulting from management’s effort to manage earnings.

Fraud risk factors involving management

41

Fraud risk factors involving employees

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 CA Sri Lanka Audit Manual, Volume 3 - SMET

7. Risk identification, Related significant accounts and Risk response

Document below significant risks identified based on overall internal control assessment and fraud
discussion. Also document related significant accounts and risk response.

Financial Statement Related Significant

Significant Risk Risk Response
Implication Accounts

Prepared by: Date:

Reviewed by:
Date:

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 CA Sri Lanka Audit Manual, Volume 3 - SMET

SMET 8: Understand Significant Business Processes (SBP), Perform

Walkthrough and Test of Controls-Cash Receipts
Company Name:

Reporting Period:

Background

We obtain an understanding of the significant business processes to identify and understand;

• What risks require mitigation and
• Controls designed to mitigate such risks

(Discuss with client to gain an understanding of the Cash receipt process and identify designated
persons to perform following key activities; indicate designation only)

Our understanding of the Critical Business Process

Key Activities Authorization
Custody
43
of Assets
Recording Control Activity

Opens mail and lists cheques

Handles receipts of currency
Prepares bank deposits
Compares listing of cheques to bank
deposit
Maintains cash receipts journal
Maintains trade receivable records
Reconciles bank accounts
Authorizes write-offs of
uncollectible accounts
Reconciles trade receivable records
to the general ledger
Controls the accuracy, completeness
of, and access to cash receipts
programs and data files

Provide any other details below or in an attachment that are necessary to understand and initiation,
recording, processing and reporting of the transactions, including major input and output sources, if
not included in the description above: (Use a seperate memorandum for detail documentation, if
required)

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 CA Sri Lanka Audit Manual, Volume 3 - SMET

Inherent Risk Considerations

The following factors should be considered in our assessment of inherent risk for the significant
accounts affected by cash receipts. ‘Yes” responses generally would indicate support of a low inherent
risk assessment for the significant accounts affected. Conversely, ‘No’ responses generally would
indicate a high inherent risk assessment for those accounts.
Yes No
Are there receipts from cash?
Are there receipts from cheques?
Are there receipts from bank standing order/Direct Deposit?
Is the number of customers and volume of activity consistent with
the prior year?
Are cash receipts processed and recorded at a single location?
Has our prior experience with the client been favorable in this area
(e.g., few errors or adjustments in the significant accounts affected
by this application)

Overall Inherent Risk Assessment: (Low/Moderate/High)

Risk Considerations (What risks requires mitigation) and Related Controls

Risk Considerations Relevant Controls Risk Response
Are cash receipts deposited in the bank at least Refer “Test of control
daily? Procedures and SMET
17- Detail Audit Plan
(Related Significant
Are unpaid trade receivable timely followed up and
Accounts)
collected?

Is someone responsible for ensuring a proper cutoff

(i.e., all cash receipts are recorded in the period
received)?
Are bank reconciliations performed and reviewed
by supervisory personnel, with reconciling items
followed-up on and resolved in a timely manner?
Is the trade receivable listing reconciled to the
general ledger and reviewed by supervisory
personnel, with reconciling items followed-up on
and resolved in a timely manner?

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 CA Sri Lanka Audit Manual, Volume 3 - SMET

Perform Walkthrough
Describe the walkthrough procedures to confirm understanding of the design of the controls and that
they have been implemented. As team walk through the prescribed procedures and controls, team
should ask personnel to describe their understanding of the control activities and demonstrate how
they are performed.

A) Walkthrough procedures
Transaction selected for
walkthrough:
Individual(s) we talked with to Date:
confirm our understanding:
Description of the walkthrough procedures performed:

45

B) Segregation of incompatible duties, authorization and Additional

management override of controls Yes No observations
a. Was anything noted in our background confirmation
walkthrough procedures that would indicate there are
incompatible duties?
If we answered “Yes” to the above:
Do the incompatible duties represent a deficiency in the design
of controls that is not sufficiently mitigated by other
management actions or controls that have been identified?
If we answered “Yes” to the above, provide further
documentation and the related effect on our audit strategy.
b. Was anything noted in our walkthrough procedures that
would indicate there are issues related to authorization?
If we answered “Yes” to the above:
Do the authorization issues represent a deficiency in the
design of controls that is not sufficiently mitigated by other
management actions or controls that have been identified?

If we answered “Yes” to the above, provide further

documentation and the related effect on our audit strategy.

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 CA Sri Lanka Audit Manual, Volume 3 - SMET

c. Was anything noted in our walkthrough of controls

that indicate the potential for management override of
controls or that such override may have occurred?
If we answered “Yes” to the above:
Does the potential for management override of controls
represent a deficiency in the design of controls that is not
sufficiently mitigated by other management actions or
controls that have been identified?

If we answered “Yes” to the above, provide further

Documentation and the related effect on our audit
strategy.

Yes No Additional
C) Conclusion N/A
observations
Did our walkthrough procedures confirm our
understanding of the routine significant business
processes?
Did our walkthrough procedures confirm that the
controls have been properly designed and
implemented?

Test of Control Procedures

If our understanding confirms that the entity has an effective business process, the audit team has the
option of selecting the test of controls as an audit strategy.

Test of Control Procedures Detail Key Findings Working Paper Reference

1.

2.

Engagement teams should document above the testing procedures relating to the controls identified.
Document in detail the nature, timing and extent of our test of controls.

Overall Control Risk Assessment: (Low/Moderate/High)

Prepared by: Date:

Reviewed by: Date:

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 CA Sri Lanka Audit Manual, Volume 3 - SMET

SMET 9: Understand Significant Business Processes (SBP),

Perform Walkthrough and Test of Controls-Payments
Company Name:

Reporting Period:

Background

We obtain an understanding of the significant business processes to identify and understand;

• What risks require mitigation and
• Controls designed to mitigate such risks

(Discuss with client to gain an understanding of the Cash payment process and identify designated
persons to perform following key activities; indicate designation only)

Our Understanding of the Critical Business Process

Key Activities Authorization 47
Custody Recording Control Activity
of Assets

Listing of items to be paid (e.g., cash

requirements listing) prepared
Cheques prepared and matched with
support
Cheques ( and voucher package)
reviewed and approved for payments)
Cheques signed
Cheques mailed
Cash payments journal prepared
Cash payments journal summarised
and posted to the general ledger
Paid invoices removed from trade
payables detail or vendor master file
Provide any other details below or in an attachment that are necessary to understand and initiation,
recording, processing and reporting of the transactions, including major input and output sources, if
not included in the description above: (Use a seperate memorandum for detail documentation, if
required)

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 CA Sri Lanka Audit Manual, Volume 3 - SMET

Inherent Risk Considerations

The following factors should be considered in our assessment of inherent risk for the significant
accounts affected by cash payments. ‘Yes” responses generally would indicate support of a low
inherent risk assessment for the significant accounts affected. Conversely, ‘No’ responses generally
would indicate a high inherent risk assessment for those accounts.
Yes No
Are cash payment transactions relatively non-complex and/or homogeneous in
nature?
Is the volume of activity low and consistent with the prior year?
Are payments made only by cheque?
Is the number of customers and volume of activity consistent with the prior year?
Are cash payments processed and recorded at a single location?

Has our prior experience with the client been favorable in this area (e.g., few
errors or adjustments in the significant accounts affected by this application)?

Overall Inherent Risk Assessment: (Low/Moderate/High)

Risk Considerations (What risks requires mitigation) and Related Controls

Risk Considerations Relevant Controls Risk Response
Are bank reconciliations performed and reviewed by Refer “Test of
supervisory personnel, with reconciling items control Procedures
followed-up on and resolved in a timely manner? and SMET 17-
Is someone responsible for ensuring a proper cutoff Detail Audit Plan
(i.e., all cash payments are recorded in the period (Related Significant
received)? Accounts)
Are cash payment journals reviewed both for unusual
items and gaps in the numerical sequence of payments?
Is appropriate documentation ( e.g., voucher package)
included when cheques are prepared and signed?
Are all electronic transfers of funds properly approved?
Are there only a few authorized signers?
Are limits established for cheque signing authority or
are cheques over a certain amount required to be
counter-signed?
Is access to blank cheques controlled?
Is access to internet keys for remote banking
controlled?

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 CA Sri Lanka Audit Manual, Volume 3 - SMET

Perform Walkthrough
Describe the walkthrough procedures to confirm understanding of the design of the controls and that
they have been implemented. As team walk through the prescribed procedures and controls, team
should ask personnel to describe their understanding of the control activities and demonstrate how they
are performed.

A) Walkthrough procedures
Transaction selected for
walkthrough:
Individual(s) we talked Date:
with to confirm our
understanding:
Description of the walkthrough procedures performed:

49

B) Segregation of incompatible duties, authorization and Additional observations

Yes No
management override of controls
a. Was anything noted in our background confirmation
walkthrough procedures that would indicate there are
incompatible duties?
If we answered “Yes” to the above:
Do the incompatible duties represent a deficiency in the
design of controls that is not sufficiently mitigated by
other management actions or controls that have been
identified?
If we answered “Yes” to the above, provide further
documentation and the related effect on our audit strategy.

b. Was anything noted in our walkthrough procedures that

would indicate there are issues related to authorization?
If we answered “Yes” to the above:
Do the authorization issues represent a deficiency in the
design of controls that is not sufficiently mitigated by
other management actions or controls that have been
identified?

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 CA Sri Lanka Audit Manual, Volume 3 - SMET

If we answered “Yes” to the above, provide further

Documentation and the related effect on our audit strategy.
c. Was anything noted in our walkthrough of controls that
indicate the potential for management override of controls
or that such override may have occurred?
If we answered “Yes” to the above:
Does the potential for management override of controls
represent a deficiency in the design of controls that is not
sufficiently mitigated by other management actions or
controls that have been identified?
If we answered “Yes” to the above, provide further
Documentation and the related effect on our audit strategy.

Additional observations
C) Conclusion Yes No N/A
Did our walkthrough procedures confirm our
understanding of the routine significant
business processes?
Did our walkthrough procedures confirm that
the controls have been properly designed and
implemented?

Test of Control Procedures

If our understanding confirms that the entity has an effective business preocess, the audit team has the
option of selecting the test of controls as an audit strategy.
Working Paper
Test of Control Procedures Detail Key Findings
Reference
1.

2.

Engagement teams should document above the testing procedures relating to the controls identified.
Document in detail the nature, timing and extent of our test of controls.
Overall Control Risk Assessment: (Low/Moderate/High)

Prepared by: Date:

Reviewed by: Date:

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 CA Sri Lanka Audit Manual, Volume 3 - SMET

SMET 10: Understand Significant Business Processes (SBP), Perform

Walkthrough and Test of Controls- Sales And Trade Receivables

Company Name:

Reporting Period:

Background

We obtain an understanding of the significant business processes to identify and understand;

• What risks require mitigation and
• Controls designed to mitigate such risks

(Discuss with client to gain an understanding of the sales and trade receivable process and identify
designated persons to perform following key activities; indicate designation only)

Our understanding of the critical business process 51

Key Activities Authorization Custody Recording Control Activity
of Assets

Customer places sales order and order

input into the system
Credit and/or credit terms approved
Order filled ans readied for shipment
Shipping documents prepared
Order shipped/delivered to or picked
up by customer
Sales invoices prepared
Prices (or deviations from standard
prices) approved
Invoices reviewed for accuracy and
mailed/delivered to customers
Sales journal produced
Sales journal summarised and posted to
general ledger and recievables detail

Breifly describe the client’s revenue recognition policy, including standard billing and collection terms:

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 CA Sri Lanka Audit Manual, Volume 3 - SMET

Briefly describe client’s credit terms and credit authorization procedures, as well as procedures for
identifying and writting off unclooectible accounts and for establishing the allowance for doubtful
accounts:

Breifly describe the client’s procedures for sales returns and allowances and the issuance of credit
memos:

Provide any other details below or in an attachment that are necessary to understand and initiation,
recording, processing and reporting of the transactions, including major input and output sources, if
not included in the description above: (Use a seperate memorandum for detail documentation, if
required)

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 CA Sri Lanka Audit Manual, Volume 3 - SMET

Inherent Risk Considerations

The following factors should be considered in our assessment of inherent risk for the significant
accounts affected by sales and trade recievables. ‘Yes” responses generally would indicate support of a
low inherent risk assessment for the significant accounts affected. Conversely, ‘No’ responses generally
would indicate a high inherent risk assessment for those accounts.

Yes No
Are sales transactions relatively non-complex and/or homogeneous in
nature?
Is the volume of sales activity (including the number of customers and
products) low and consistent with the prior year?
Are the types of customers consistent with the prior year?
Are all sales made from a single location?
Can the timing of the revenue recognition be clearly established?
Are all sales unconditional (i.e., few, if any, sales on a trial basis or with a
right of return?
Is the volume of returns ( and credit notes) low?
53
Are customer rebates, charge-backs, and credit notes insignificant?
Do clients have the right to return goods at their discretion?

Has our prior experience with the client been favorable in this area (e.g., few
errors or adjustments in the significant accounts affected by this
application)?

Overall Inherent Risk Assessment: (Low/Moderate/High)

Risk Considerations (What risks requires mitigation) and Related Controls

Risk Considerations Relevant Controls Risk Response

Is the trade receivable listing reconciled to the Refer “Test of control
general ledger and reviewed by supervisory Procedures and SMET
personnel, with reconciling items followed-up and 17- Detail Audit Plan
resolved in a timely manner? (Related Significant
Is someone responsible for ensuring a proper cutoff
Accounts)
(i.e., all sales are recorded in the period in which
goods are shipped or services are performed)?
Are unmatched sales orders and invoices
investigated in a timely manner?
Are pre-numbered invoices used to document all
sales transactions?
Is the modification of standard pricing by sales
personnel or management properly authorized?

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 CA Sri Lanka Audit Manual, Volume 3 - SMET

Perform Walkthrough
Describe the walkthrough procedures to confirm understanding of the design of the controls and that
they have been implemented. As team walk through the prescribed procedures and controls, team
should ask personnel to describe their understanding of the control activities and demonstrate how they
are performed.

A) Walkthrough procedures
Transaction selected for
walkthrough:
Individual(s) we talked with to Date:
confirm our understanding:
Description of the walkthrough procedures performed:

B) Segregation of incompatible duties, authorization and Additional

Yes No
management override of controls observations
a. Was anything noted in our background confirmation walkthrough
procedures that would indicate there are incompatible duties?
If we answered “Yes” to the above:
Do the incompatible duties represent a deficiency in the design of
controls that is not sufficiently mitigated by other management
actions or controls that have been identified?
If we answered “Yes” to the above, provide further documentation
and the related effect on our audit strategy.
b. Was anything noted in our walkthrough procedures that would
indicate there are issues related to authorization?
If we answered “Yes” to the above:
Do the authorization issues represent a deficiency in the design of
controls that is not sufficiently mitigated by other management
actions or controls that have been identified?
If we answered “Yes” to the above, provide further
Documentation and the related effect on our audit strategy.

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 CA Sri Lanka Audit Manual, Volume 3 - SMET

c. Was anything noted in our walkthrough of controls that

indicate the potential for management override of controls or
that such override may have occurred?
If we answered “Yes” to the above:
Does the potential for management override of controls
represent a deficiency in the design of controls that is not
sufficiently mitigated by other management actions or
controls that have been identified?
If we answered “Yes” to the above, provide further
Documentation and the related effect on our audit strategy.

Additional
C) Conclusion Yes No N/A observations
Did our walkthrough procedures confirm our
understanding of the routine significant business
processes?
Did our walkthrough procedures confirm that the
controls have been properly designed and implemented?
55

Test of Control Procedures

If our understanding confirms that the entity has an effective business process, the audit team has the
option of selecting the test of controls as an audit strategy.
Test of Control Procedures Detail Key Findings Working
Paper
Reference
1.

2.

3.

Engagement teams should document above the testing procedures relating to the controls identified.
Document in detail the nature, timing and extent of our test of controls.
Overall Control Risk Assessment: (Low/Moderate/High)

Prepared by: Date:

Reviewed by: Date:

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 CA Sri Lanka Audit Manual, Volume 3 - SMET

SMET 11: Understand Significant Business Processes (SBP), Perform

Walkthrough and Test of Controls- Purchase and Trade Payables

Company Name:

Reporting Period:

Background

We obtain an understanding of the significant business processes to identify and understand;

• What risks require mitigation and
• Controls designed to mitigate such risks

(Discuss with client to gain an understanding of the purchase and trade payables process and identify
designated persons to perform following key activities; indicate designation only)

Our understanding of the critical business process

Key Activities Authorization Custody Recording Control Activity
of Assets

Purchase requisition prepared

Purchase requisition approved
Purchase order issued
Goods/services recieved and
inspected/approved
Receiving report prepared
Receipt of inventory
(materials)entered into inventory
perpetual system
Invoice recieved and matched with
purchase order and recieving report
Inovice reviewed for accuracy,
account code assigned, and
transaction entered into the system
Purchase journal produced
Purchase journal summarised and
posted to general ledger and creditor
detail

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Provide any other details below or in an attachment that are necessary to understand and initiation,
recording, processing and reporting of the transactions, including major input and output sources, if not
included in the description above: (Use a seperate memorandum for detail documentation, if required)

Inherent Risk Considerations

The following factors should be considered in our assessment of inherent risk for the significant accounts
affected by purchases and trade payables. ‘Yes” responses generally would indicate support of a low
inherent risk assessment for the significant accounts affected. Conversely, ‘No’ responses generally would
indicate a high inherent risk assessment for those accounts.
Yes No

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Are purchase transactions relatively non-complex and/or homogeneous in
nature?
Is the volume of activity and the number and type of suppliers low and
consistent with the prior year?
Are suppliers rebate, charge-backs, and debit memoranda insignificant?
Are all purchases made from a single location?
Considering the nature of purchase items, is it difficult for employees to easily
resell these items without the company’s knowledge?
Has our prior experience with the client been favorable in this area (e.g., few
errors or adjustments in the significant accounts affected by this application)?

Overall Inherent Risk Assessment: (Low/Moderate/High)

Risk Considerations (What risks requires mitigation) and Related Controls

Risk Considerations Relevant Controls Risk Response
Is the trade payable listing reconciled to the general Refer “Test of
ledger and reviewed by supervisory personnel, with control Procedures
reconciling items followed-up and resolved in a timely and SMET 17-
manner?
Detail Audit Plan
Is someone responsible for ensuring a proper cutoff (i.e.,
(Related
all purchases are recorded in the period in which goods
are received or services are performed)? Significant
Are unmatched purchase orders, receiving reports, and Accounts)
invoices investigated in a timely manner?
Are purchase authorization limits established?

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Perform Walkthrough
Describe the walkthrough procedures to confirm understanding of the design of the controls and that
they have been implemented. As team walk through the prescribed procedures and controls, team
should ask personnel to describe their understanding of the control activities and demonstrate how
they are performed.

A) Walkthrough procedures
Transaction selected for
walkthrough:
Individual(s) we talked with Date:
to confirm our understanding:
Description of the walkthrough procedures performed:

B) Segregation of incompatible duties, authorization and Additional

management override of controls Yes No observations
a. Was anything noted in our background confirmation
walkthrough procedures that would indicate there are
incompatible duties?
If we answered “Yes” to the above:
Do the incompatible duties represent a deficiency in the
design of controls that is not sufficiently mitigated by other
management actions or controls that have been identified?
If we answered “Yes” to the above, provide further
documentation and the related effect on our audit strategy.
b. Was anything noted in our walkthrough procedures that would
indicate there are issues related to authorization?
If we answered “Yes” to the above:
Do the authorization issues represent a deficiency in the
design of controls that is not sufficiently mitigated by other
management actions or controls that have been identified?
If we answered “Yes” to the above, provide further
Documentation and the related effect on our audit strategy.

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c. Was anything noted in our walkthrough of controls that

indicate the potential for management override of controls or
that such override may have occurred?
If we answered “Yes” to the above:
Does the potential for management override of controls
represent a deficiency in the design of controls that is not
sufficiently mitigated by other management actions or
controls that have been identified?
If we answered “Yes” to the above, provide further
Documentation and the related effect on our audit strategy.

C) Conclusion Yes No N/A Additional observations

Did our walkthrough procedures confirm our

understanding of the routine significant
business processes?
Did our walkthrough procedures confirm
that the controls have been properly
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designed and implemented?

Test of Control Procedures

If our understanding confirms that the entity has an effective business process, the audit team has the
option of selecting the test of controls as an audit strategy.
Test of Control Procedures Detail Key Findings Working Paper
Reference
1.

2.

3.

Engagement teams should document above the testing procedures relating to the controls identified.
Document in detail the nature, timing and extent of our test of controls.
Overall Control Risk Assessment: (Low/Moderate/High)

Prepared by: Date:

Reviewed by: Date:

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SMET 12: Understand Significant Business Processes (SBP),

Perform Walkthrough and Test of Controls-Payroll
Company Name:

Reporting Period:

Background

We obtain an understanding of the significant business processes to identify and understand;

• What risks require mitigation and
• Controls designed to mitigate such risks

(Discuss with client to gain an understanding of the payroll process and identify designated persons to
perform following key activities; indicate designation only)

Our understanding of the critical business process

Key Activities Authorization Custody Recording Control
of Assets Activity

New hires and terminations approved

Pay rates reviewed and approved
Time cards/reports prepared and
information (hours,etc.) input or
trnasferrred into the payroll system
Payroll calculated using pay rates in
employee master file (including salaried
employees)
Payroll cheques prepared
Payroll approved and cheques signed
Payroll cheques dusturebed or mailed
(or direct deposit made)
Payroll journal prepared
Payroll journal summarized and posted
to general ledger

Provide any other details below or in an attachment that are necessary to understand and initiation,
recording, processing and reporting of the transactions, including major input and output sources, if
not included in the description above: (Use a seperate memorandum for detail documentation, if
required)

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Inherent Risk Considerations

The following factors should be considered in our assessment of inherent risk for the significant
accounts affected by payroll. ‘Yes” responses generally would indicate support of a low inherent risk
assessment for the significant accounts affected. Conversely, ‘No’ responses generally would indicate a
high inherent risk assessment for those accounts.
Yes No
Is the volume of activity (including the number of employees, and changes in
employee basis) low and consistent with the prior year?
Is the level of activity (i.e., hours worked) consistent throughout the year?
Are payments made only by cheque or direct deposit (i.e., no payments in cash)?
Is there consistency in the nature of services rendered by employees (i.e.,
employees or groups of employees do not perform different tasks at different
wage rates)?
Is payroll processed at a single location?
Is payroll processed by a service provider?
Is the owner-manager familiar with most, if not all, of the employees?
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Has our prior experience with the client been favorable in this area (e.g., few
errors or adjustments in the significant accounts affected by this application)?
Does financial management review compliance with social contribution and
withholding tax requirements?
Does the company make significant use of temporary work?
Does the company outsource activities on the Company’s premises (e.g.,
cooperative)?

Overall Inherent Risk Assessment: (Low/Moderate/High)

Risk Considerations (What risks requires mitigation) and Related Controls

Risk Considerations Relevant Controls Risk Response
Are bank reconciliations performed and reviewed by Refer “Test of
supervisory personnel, with reconciling items followed-up control
and resolved in a timely manner? Procedures and
Is the employee master file, including pay rates, maintained SMET 17- Detail
independent of accounting and operations?
Audit Plan
Does the calculation of accrued vacation pay consider the
actual days of vacation earned as of the calculation date and (Related
used as of the same date? Is this reviewed for reasonableness? Significant
If an outside payroll service is used, does someone compare Accounts)
information received from the payroll service organization to
data submitted by the client maintained in the payroll file (i.e.,
comparison of input and output)?
Are social contribution and tax withholding payments
reviewed by finance manager in addition to payroll manager?

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Perform Walkthrough
Describe the walkthrough procedures to confirm understanding of the design of the controls and that
they have been implemented. As team walk through the prescribed procedures and controls, team
should ask personnel to describe their understanding of the control activities and demonstrate how they
are performed.
A) Walkthrough procedures
Transaction selected for
walkthrough:
Individual(s) we talked with Date:
to confirm our understanding:
Description of the walkthrough procedures performed:

B) Segregation of incompatible duties, authorization and Additional

Yes No
management override of controls observations
a. Was anything noted in our background confirmation
walkthrough procedures that would indicate there are
incompatible duties?
If we answered “Yes” to the above:
Do the incompatible duties represent a deficiency in the design
of controls that is not sufficiently mitigated by other
management actions or controls that have been identified?
If we answered “Yes” to the above, provide further
documentation and the related effect on our audit strategy.
b. Was anything noted in our walkthrough procedures that would
indicate there are issues related to authorization?
If we answered “Yes” to the above:
Do the authorization issues represent a deficiency in the design
of controls that is not sufficiently mitigated by other
management actions or controls that have been identified?
If we answered “Yes” to the above, provide further
Documentation and the related effect on our audit strategy.

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c. Was anything noted in our walkthrough of controls that indicate

the potential for management override of controls or that such
override may have occurred?
If we answered “Yes” to the above:
Does the potential for management override of controls
represent a deficiency in the design of controls that is not
sufficiently mitigated by other management actions or controls
that have been identified?
If we answered “Yes” to the above, provide further
Documentation and the related effect on our audit strategy.

C) Conclusion Yes No N/A Additional observations

Did our walkthrough procedures confirm our

understanding of the routine significant
business processes?
Did our walkthrough procedures confirm
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that the controls have been properly
designed and implemented?

Test of Control Procedures

If our understanding confirms that the entity has an effective business process, the audit team has the
option of selecting the test of controls as an audit strategy.
Test of Control Procedures Detail Key Findings Working Paper Reference

1.

2.

3.

Engagement teams should document above the testing procedures relating to the controls identified.
Document in detail the nature, timing and extent of our test of controls.
Overall Control Risk Assessment: (Low/Moderate/High)

Prepared by: Date:

Reviewed by: Date:

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SMET 13: Understand Accounting Estimates Process

Company Name:

Reporting Period:

Name of Estimate:

Understand the Accounting Estimate

Obtain an understanding of how management makes the accounting estimate and how data on which the
accounting estimate is based is generated.

Briefly describe the important elements of the entity’s estimation process (Inputs, methods used to
calculate and key assumptions, output)

Consideration Response

Is the method used based on that prescribed by the

financial reporting framework? If not, is the method
appropriate e.g., is the method used common to the
industry or environment in which the entity operates?
Has there been, or ought to have been, a change in the
method from prior period?
Has management assessed the effect of estimation
uncertainty? Estimation uncertainty is the susceptibility of
the accounting an estimate and related disclosures to an
inherent lack of precision in its measurement.
How does the management determine the completeness,
relevance and accuracy of the data used in the calculation
of the estimate?
Who prepares, reviews, and approves the estimate,
including the assumptions used?
Are there appropriate segregation of duties between those
committing the entity to the transactions giving rise to the
estimates and those calculating and authorizing the
estimate?
Has management used an expert?

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Review of Relevant Prior Year Estimates

Does the outcome support the effectiveness of the process
in the prior year?
Were the assumption applied considered appropriate?

As we consider this and other estimates are there

indications of management bias?

Significant Risk Identified

Risk Response (Include a summary of key risk response)

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Conclusions (Based on risk response results)

Procedure Key Findings

Base on the audit evidence is the estimate

reasonable in the context of the financial reporting
framework?

Are there indicators of possible management bias

in the calculation of the estimate?

Do we require specific written representations

from managements?

Prepared by: Date:

Reviewed by: Date:

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SMET 14: Understand the Financial Statement Close Process

Company Name:

Reporting Period:

Background
We understand and evaluate the design and operation of the financial statement close process (FSCP)
and the relevant controls used by the entity to initiate, authorize, and record journal entries. The FSCP
transforms the transactions reflected in the entity’s accounting records into financial statements and
related disclosures, and represents a separate significant business process. The extent of our
understanding is determined by the complexity of the FSCP.

Understanding the Critical Business Process

Custody
Control
Key Activities Authorization of Assets Recording
Activity
Prepare the trial balance
Prepare the consolidations (if applicable)
Reconcile significant acounts to subsidiary
ledgers
Accumulate, prepare and record post-
closing journal entries
Draft the financial statements
Prepare information resulting in financail
statement disclosures associated with all
significant accounts
Preprae information resulting in financial
statement disclosures that ara not related
to specific significant account and require
specially extracted data(e.g. related party
transactions, contingencies etc.)
Prepare final reports (e.g., directors’s
report)
Prepare analyses of financial statements
and realted disclosures for submission to
managemetn or other parties (e.g.,
directors)

If necessary, provide additional comments below on the client’s FSCP form initiation through reporting
in the financial statements, including who participates from management, and significant inputs and
outputs of the process:

Prepared by: Date:

Reviewed by: Date:

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SMET 15: Understand Significant Business Process-

Related Party relationship and transactions
Company Name:

Reporting Period:

Risk assessment procedures and related activities for related party relationships and transactions.

Identify related party relationships and transactions

1. Obtain a list of relationships and transactions with related parties, or inquire of management
about related party relationships and transactions and document below.
Name of the related Relationship to entity Nature of transactions Dominant
party influence?

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Details of related party relationships and transactions are shared with all members of the engagement
team (and with component teams when performing a multi location audit).

2. Inquire of management about significant transactions outside the entity’s normal course of
business to establish the nature of these transactions and whether related parties could be
involved.
(Document Results of work performed)

Inquire how management authorizes and approves significant transactions and arrangements
outside the normal course of business with related parties.
(Document Results of work performed)

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3. At the team meeting, discuss information about the entity’s related party relationships and
transactions. Include specific consideration of the susceptibility of the financial statements to
material misstatement due to fraud or error that could result from the entity’s related party
relationships and transactions.

(Document results of discussion)

Gain an understanding of how related party transactions are processed

1. Obtain an understanding of how management identifies, authorizes, processes and accounts for
significant related party transactions in accordance with the applicable financial reporting
framework.
Often related party transactions are processed separately from transactions with unrelated parties.
In other circumstances, related party transactions may be processed within the same process as
those with unrelated parties. Regardless of how related party transactions are processed and
whether auditors are taking a controls reliance strategy or a substantive only strategy, obtain a
high-level understanding of relevant controls over related party transactions and perform
walkthroughs to confirm the design and implementation of the relevant controls.
When related party transactions are processed in the same Significant Business Process (SBPs) as
transactions with unrelated parties, auditor may cross reference to our documentation of that SBPs.
However, we include additional documentation of relevant controls over the initiation (including
authorization), recording, processing and reporting of related party transactions where these have
not already been identified and documented. Document below the understanding at related party
transactions or cross reference to other workpapers.

2. Through inquiry, obtain an understanding of the significant disclosure process and related controls
that management has established to disclose related party relationships in accordance with the
applicable financial reporting framework.

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Completeness of related party transactions

1. Inspect the following documents for existence of related party relationships or transactions that
management has not previously identified or disclosed.
• Bank and legal confirmations obtained
• Minutes of shareholder meetings and minutes of meetings of those charged with governance
• Any other records or documents that we deem necessary. [list documents]

2. During the audit, remain alert for arrangements or other information that may indicate the existence
of related party relationships or transactions that management has not previously identified or
disclosed to us.
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(Document arrangements or information that suggest the existence of previously undisclosed
related party relationships or transactions, or note “None” if none are identified)

Significant Risks

Consider the results of above procedures and the identified risks of material misstatements. [Determine
whether auditors have identified significant risks, including risks of material misstatements due to fraud,
arising from related party relationships and transactions. In making this determination, related party
transactions outside the entity’s normal course of business always give rise to a significant risk.]

(Document significant risks, including risks of material misstatements due to fraud)

Prepared by: Date:

Reviewed by: Date:

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Appendix 1 Examples of procedures when testing related party relationships and transactions

The following are examples of procedures auditor may perform to respond to risks of material
misstatement associated with related party relationships and transactions:

• Test the entity’s compilation of the amounts to be disclosed in the financial statements with respect
to related party relationships and transactions.

• Test the entity’s controls over the completeness and accuracy of the recording of related party
relationships and transactions.

• Examine invoices, agreements, contracts and other pertinent documentation supporting the related
party transactions.

• Confirm amounts and terms of related party transactions, including guarantees and other
significant information, with the other parties to the transactions.

• Confirm or discuss significant information with intermediaries such as banks, guarantors, agents,
or lawyers to obtain a better understanding of the related party transaction.

• Inspect or confirm the transferability and value of collateral, if any.

• Obtain information about the financial capabilities of the other parties to the transaction when it
results in material uncollected balances, guarantees or other obligations. Possible sources of such
information include audited or unaudited financial statements, income tax returns and reports
issued by regulatory agencies, financial publications or credit agencies.

• Arrange for:

• The review of intercompany account balances all at the same date, even if the related
entities’ period ends differ

• The audit of specified, important and representative transactions with related parties by
the auditors of each of the related entities.
Some examples of procedures auditor may perform when evaluating transactions with a related party
when we consider there to be dominant influence:
• Inquiries of management and those charged with governance
• Inquiries of the related party
• Inspection of significant contracts with the related party
• Appropriate background research of the related party and the business relationship with the entity
to determine potential influences on the transaction
• Review of employee whistle-blowing reports if these are retained

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SMET 16: Risk of Material Misstatement Assessment Form

(RMM form)
Company Name:

Reporting Period:

Risk
Related Business Assertions IR CR RMM Assessment
Significant Account
Significant Processes
Comments
Statement of Comprehensive Income
C H L M
Sales and Trade E
Sales Receivable, Cash A
Receipts V

Purchase and Trade

P&D
C
E
71
Cost of Sales Payable A
V
P&D
C
Purchase and Trade E
Administrative
Payable, Accounting A
Expenses
Estimates V
P&D
[Other 1]
[Other 2]
Statement of Financial Position
C
Purchase and Trade E
Property, Plant &
Payable, Accounting A
Equipment
Estimates V
P&D
C
Purchase and Trade E
Inventory Payable A
V
P&D
C
Sales and Trade E
Trade Receivables Receivable, Cash A
Receipts V
P&D
[Other 1]
[Other 2]

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Key:
H – High IR – Inherent Risk C – Completeness V – Valuation

L – Low CR – Control Risk E – Existence P&D – Presentation and

Disclosure

M – Moderate RMM – Risk of Material A - Accuracy

Misstatement

Note :

1. If there is one or more significant risks associated with a significant account balance (i.e.,
significant risks identified during the risk assessment procedures), RMM should be set at high
for those areas.

2. Refer “SMET 17 – Detail Audit Plan” for detail response for assessed RMM.

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SMET 17A- Detail Audit Plan: Property, Plant and Equipment

Planning Final
Number Are you Comments Initials
of satisfied
Audit objectives key tests that the
which objectives
satisfy have been
objective* met?

1 To establish that property, plant & 10,11 Yes/No

equipment and leased assets exist
and its register/ listing is complete.
2 To establish that property, plant & 12 Yes/No
equipment and leased assets are
beneficially owned.
3 To verify that all property, plant & 13, 14, 15, Yes/No
equipment and leased assets are 16, 17, 18,
recorded at cost or valuation and
that the basis is acceptable.
19, 20, 23 73
4 To confirm that impairment and 21, 22 Yes/No
depreciation are adequately provided
for the property, plant, equipment
and leased assets.
5 To confirm that all necessary 24, 25, 26, Yes/No
disclosures concerning fixed assets 27
have been made and that the
information is appropriately
presented and described.

Planning conclusion
I am satisfied that from the tests planned sufficient appropriate evidence can be gained to satisfy
the objectives.
Prepared by: Date:

Reviewed by: Date:

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Final conclusion
From the audit work carried out I confirm that:
- the work has been performed in accordance with the detail audit plan;
- the work performed and the results obtained have been adequately documented;
- all necessary information has been collected for the presentation and disclosure in the
financial statements;
- sufficient and appropriate evidence has been obtained to support the audit conclusion
reached; and
- in my opinion property, plant & equipment and leased assets are fairly stated/ *not fairly
stated as described below

Prepared by: Date:

Reviewed by: Date:

*Delete as appropriate

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Test Results Initials

required satisfactory W.P Ref Comments and
Y/N Y/N date
General
1 Agree opening balances to last year’s accounts.
2 Obtain and check, or prepare, a lead schedule for the current year’s
figures and reconcile this to the general ledger.
3 Examine any material journal entries or other adjustments made
during the course of preparing the financial statements.
4 Carry out analytical procedures such as:
(a) comparison of the current figures with those of prior periods;
(b) review and comparison of key ratios or other performance
indicators.
5 Review the planned extent of reliance on internal controls in this area
and consider whether this remains appropriate.
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6 Assess whether the initial materiality and/or risk assessment should be
revised in view of the audit evidence obtained. Record details of any
necessary adjustments. Consider the impact on the remainder of the
audit work and on any work undertaken to date.
7 Review for large and/or unusual items and verify.
8 Review of appropriateness and consistency of accounting policies
used by the entity.
9 Review capitalization policy which is in accordance with the
definition of relevant accounting standards and satisfy recognition
criteria and lease classification where applicable.

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Test Results Initials

required satisfactory W.P Ref Comments and
Y/N Y/N date
Existence/Completeness
10 Carry out physical inspection of assets including both current year
additions and assets purchased in previous years.
(a) Test for existence by selecting items from the asset register and
checking back to the physical assets.
(b) Test for completeness by selecting physical assets and checking
the quantity counted with the asset register.
(c) Where physical verification has not been undertaken, detail the
steps carried out to establish that all assets exist.
11 Ensure the completeness of PPE and leased assets by:
(a) examining board minutes
(b) identifying unrecorded liabilities
Ownership
12 (a) Confirm or inspect title deeds to all properties.
(b) Perform land search for properties situated both locally or
overseas.
(c) Inspect lease agreement or obtain direct confirmation from bank
or other custodian of PPE.
(d) Inspect the motor vehicle registration documents for motor
vehicles owned by the Company.
(e) if an asset is acquired under a finance lease, ensure that
substantially all the risks and rewards of that asset are incidental
to its ownership.
Cost and valuation
13 Ensure the entity has accounted for its PPE by adopting the cost
model or the revaluation model.

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Test Results Initials

required satisfactory W.P Ref Comments and
Y/N Y/N date
14 Vouch additions to supporting documentation. Ensure that:
(a) the cost is correctly recorded;
(b) they have been properly authorized;
(c) they are correctly classified;
(d) they are of a capital, not revenue nature;
(e) the value has been correctly computed where they represent the
capitalization of items made internally;
(f) assets acquired were delivered prior to the balance sheet date;
(g) assets acquired under finance leases are treated correctly in
accordance with provision of relevant standards.
15 Ensure cost has been correctly determined
16 For leases concerning land and buildings consider whether:
(a) it is necessary to measure the land and buildings elements
separately 77
(b) any of the exceptions from the need to follow this treatment as
in SLFRSs
(c) proper distinction has been drawn as follows:
! land in Sri Lanka and held on long, medium-term and long
leases
! land outside Sri Lanka, freehold and held on long, medium-
term and long leases
17 Vouch disposals to available evidence.
Ensure that:
(a) sales proceeds have been correctly accounted for;
(b) profit /loss on disposal has been correctly calculated;
(c) They have been properly authorized;
(d) they have been removed from the fixed asset register/listing.
18 Where there is a policy of revaluation for a class of assets is that
policy applied consistently to all assets in that class?

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Test Results Initials

required satisfactory W.P Ref Comments and
Y/N Y/N date
19 Where property, plant and equipment is acquired in exchange for a
non-monetary asset or assets, or a combination of monetary and
non-monetary asset, ensure that the cost of property, plant and
equipment is measured at fair value unless:
(a) the exchange transaction lacks commercial substance; or
(b) the fair value of neither the asset received nor the asset given
up is reliably measurable.
(c) If the acquired item is not measured at fair value, its cost is
measured at the carrying amount of the asset given up.
20 Where the valuation model is being applied confirm that:
(a) supporting documentations exists for the valuations such as an
appraisal report or an estimate of fair value using an income or
depreciated replacement cost approach;
(b) any revaluation increase is credited to equity;
(c) any revaluation decrease is debited first against any previous
revaluation surplus and secondly to in the statement of
comprehensive income.
(d) where a revalued asset was disposed of; any revaluation
surplus was transferred to equity and not recycled through the
statement of comprehensive income.
Impairment
21 Consider whether there are any indicators of impairment, which
might adversely affect the value of the assets, and ensure that these
have been dealt with in accordance with applicable accounting
standards.

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Test Results Initials

required satisfactory W.P Ref Comments and
Y/N Y/N date
(a) Where any such indication exists,
enquire if the entity has estimated the recoverable amount of
assets (i.e. the higher of an asset’s fair value less cost to sell
and its value in use).
(b) Where an increase in carrying value is attributable to a
reversal of previous impairment loss; confirm that the
carrying value (net of depreciation and amortization) does not
exceed the value at which the asset would have been stated
had no previous impairment loss been recognized.
Depreciation
22 In respect of the charge to depreciation:
(a) Compare bases and rates of depreciation with accounting
policy note and ensure consistency.
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(b) Have rates been considered for each significant part of PPE
based on different useful life, rate of consumption and
separability etc.
(c) Review the methods applied and consider whether they are
appropriate to the pattern of consumption of the assets.
(d) Confirm that all assets are being depreciated in accordance
with the company’s accounting policy.
(e) Test the Reasonableness of depreciation charge for the
year/period.
(f) Ensure that no assets have been Depreciated by more than the
lower of cost or residual value.
(g) Where leasehold land is treated as a finance lease because
lease payments cannot be allocated reliably between land and
buildings: ensure that it is amortized / depreciated over its
useful life or a lease term.

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Test Results Initials

required satisfactory W.P Ref Comments and
Y/N Y/N date
Foreign Currencies
23 Ensure the entity accounted for foreign currency transactions in
accordance with SLFRSs
Presentation and disclosure
24 Confirm that a disclosure checklist will be completed for this year.
Where that is not the case explain how the objectives relating to
disclosure will be achieved.
25 Ensure that there is sufficient appropriate evidence on the file to
support the disclosures made such as property valuations, the book
value of leased assets and assets pledged as security for liabilities.
26 Ensure that where assets have been revalued during the year:
(a) the revaluation is accounted for correctly through the income
statement or statement of comprehensive income as
appropriate; and
(b) any necessary historical cost information is available for
disclosure purposes.
27 Accumulate information regarding long-term lease commitments
including finance leases (as lessees) and operating leases (as
lessors), such as lease term, monthly rental, expiry date,
outstanding principal balances and finance charges etc.
Uncorrected Misstatements
28 Identify and report all uncorrected misstatements.
Conclusion
29 Consider whether there are any points which need to be included
in a letter of representation or management letter.

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SMET 17B- Detail Audit Plan: Intangible Assets

Planning Final
Number of Are you Comments Initials
key tests satisfied
Audit objectives
Which that the
satisfy objectives
objective* have been
met?
1 To ensure that all intangible assets exist 10,11 Yes/No
and the register/listing is complete.
2 To ensure that intangible assets have been 12, 13, 14, 15, Yes/No
valued properly. 16, 17, 18, 19,
23
3 To ensure amortization and impairment 20, 21, 22 Yes/No
are adequate if applicable.
4 To confirm that all necessary disclosures 24, 25 Yes/No
concerning intangible fixed assets have
been made and that the information is 81
appropriately presented and described.

Planning conclusion
I am satisfied that from the tests planned sufficient appropriate evidence can be gained to satisfy the
objectives.

Prepared by: Date:

Reviewed by: Date:

Final conclusion
From the audit work carried out I confirm that:
- the work has been performed in accordance with the detail audit plan;
- the work performed and the results obtained have been adequately documented;
- all necessary information has been collected for the presentation and disclosure in the financial
statements.
- sufficient and appropriate evidence has been obtained to support the audit conclusion reached.
- in my opinion intangible assets are fairly stated/ *not fairly stated as described below:

Prepared by: Date:

Reviewed by: Date:

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required satisfactory and
Y/N Y/N date
General
1 Agree the opening balances to last year’s accounts.
2 Obtain and check, or prepare, a lead schedule for the current
year’s figures and reconcile this to the general ledger.
3 Examine any material journal entries or other adjustments made
during the course of preparing the financial statements.
4 Carry out analytical procedures such as:
(a) comparison of the current figures with those of prior periods;
(b) review and comparison of key ratios or other performance
indicators.
5 Review the planned extent of reliance on internal controls in this
area and consider whether this remains appropriate.
6 Assess whether the initial materiality and/or risk assessment
should be revised in view of the audit evidence obtained. Record
details of any necessary adjustments . Consider the impact on the
remainder of the audit work and on any work undertaken to date.
7 Review for large and/or unusual items and verify.

8 Review of appropriateness and consistency of accounting policies

used by the entity.
9 Review capitalization policy to ensure that it is in accordance with
relevant standards

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required satisfactory and
Y/N Y/N date
Existence
1. Ensure the existence of intangible assets by:
(a) inspecting documents of title e.g. patent, license, etc.
(b) examining evidence of expenditure incurred e.g. purchase details
for intangible asset separately acquired, acquired in a business
combination, internally generated, etc.
Completeness
2. Ensure the completeness of intangible assets by:
(a) assessing whether there was any expenditure that should have been
capitalized as intangible assets but expensed in the income
statement.
(b) reviewing board minutes and
(c) performing search for unrecorded liabilities
Cost/valuation
83
3. Ensure intangible assets are properly classified under:
(a) Intangible assets with finite useful lives; and
(b) Intangible assets with indefinite useful lives.
4. Ensure sufficient and appropriate reasons are obtained to support
indefinite useful life assessments.
5. Ensure the entity has accounted for its intangible assets by adopting
the cost model or the revaluation model
6. Vouch additions to supporting documentation. Ensure that:
(a) cost has been correctly recorded;
(b) they have been added to the intangible asset register/listing;
(c) they have been appropriately capitalized in the current financial
year/period; and
(d) they have been properly authorized.

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required satisfactory and
Y/N Y/N date
16 Has the cost been correctly determined as follows:
(a) For assets separately acquired: purchase price plus any
directly attributable costs
(b) For assets acquired as part of a business combination: fair
value at the acquisition date
(c) For assets exchanged and internally generated, relevant
guidance in the standards have been followed.
(d) For assets internally generated:
expenditure incurred and any directly attributable costs.
17 Ensure that expenditure on an intangible item that was initially
recognized as an expense shall not be recognized as part of the
cost of an intangible asset at a later date.
18 Vouch disposals to supporting documentation. Ensure that:
(a) any sales proceeds have been correctly accounted for;
(b) any profit or loss on disposal has been correctly calculated;
(c) they have been removed from the intangible asset register/
listing;
(d) they should be derecognized in the current financial year/
period; and
(e) they have been properly authorized.
19 Where the revaluation model is being applied for a class of assets
ensure that:
(a) the policy is applied consistently to all assets in that class.
(b) revaluation increases and decreases are properly recorded
and
(c) where a revalued asset was disposed of, any revaluation
surplus was transferred to equity and not recycled through the
statement of comprehensive income.

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required satisfactory and
Y/N Y/N date
Amortization

20 For intangible assets with finite useful lives:

(a) Compare bases and rates of amortization with accounting
policy note and ensure consistency.
(b) Review the methods applied and consider whether they are
appropriate to the pattern of future economic benefits
embodied in the assets.
(c) Confirm that all assets are being amortized in accordance with
the company’s accounting policy.
(d) Test check calculations or check reasonableness of
amortization charge for the year/period.
(e) Ensure that no assets have been amortized by more than the
lower of cost or residual value.
21 For intangible assets with indefinite useful lives:
85
(a) Reviewed each year/period to determine whether events and
circumstances continue to support an indefinite useful life
assessment for such asset.
(b) If not, amortization shall be tested in step 20.
Impairment
22 Consider whether there are any indicators of impairment, which
might adversely affect the value of the assets, and ensure that these
have been dealt with in accordance with applicable accounting
standards. In addition, intangible assets with indefinite useful lives
and intangible asset not yet available for use must be assessed for
impairment annually.

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required satisfactory and
Y/N Y/N date

Impairment
(a) If the recoverable amount of an asset (i.e. the higher of an
asset’s fair value less cost to sell and its value in use) is less
than the carrying amount, ensure an impairment loss has been
recognized immediately in profit or loss, unless the asset is
carried at revalued amount;
(b) Where an increase in carrying value is attributable to a
reversal of previous impairment loss; confirm that the
carrying value (net of amortization) does not exceed the
value at which the asset would have been stated had no
previous impairment loss been recognized.
Foreign Currencies
23 Ensure the entity accounted for foreign currency transactions in
accordance with SLFRSs.
Presentation and disclosure
24 Confirm that a disclosure checklist will be completed for this year.
Where that is not the case explain how the objectives relating to
disclosure will be achieved.
25 Ensure that there is evidence on the file to support the disclosures
made.
Uncorrected Misstatements
26 Identify and report all uncorrected misstatements.
Conclusion
27 Consider whether there are any points which need to be included
in a letter of representation or management letter.

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SMET 17C- Detail Audit Plan: Investment Properties

Planning Final
Number of Are you Comments Initials
key tests satisfied that
Audit objectives
which the
satisfy objectives
objective* have been
met?
1 To establish that investment properties 10, 11, 12 Yes/No
exist and the register/ listing is
complete.
2 To establish that investment properties 13 Yes/No
are beneficially owned.
3 To verify that all investment properties 14, 15, 16, Yes/No
are recorded at cost or valuation and 17, 18, 19,
that the basis is acceptable. 22
4 To confirm that impairment and
depreciation is adequately provided for
20, 21 87
Yes/No

properties where applicable.

5 To confirm that all necessary 23, 24 Yes/No
disclosures concerning investment
property have been made and that the
information is appropriately presented
and described.
Planning conclusion

I am satisfied that from the tests planned sufficient appropriate evidence can be gained to satisfy the
objectives.

Prepared by: Date:

Reviewed by: Date:

Final conclusion

From the audit work carried out I confirm that:

- the work has been performed in accordance with the detail audit plan;
- the work performed and the results obtained have been adequately documented;
- all necessary information has been collected for the presentation and disclosure in the financial
statements; and
- sufficient and appropriate evidence has been obtained to support the audit conclusion reached.
- in my opinion investment properties are fairly stated/ *not fairly stated as described below.

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Prepared by: Date:

Reviewed by: Date:

* Delete if not applicable.

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required satisfactory W.P Ref Comments and
Y/N Y/N date
General
1 Agree opening balances to last year’s accounts.
2 Obtain and check, or prepare, a lead schedule for the current year’s
figures and reconcile this to the general ledger.
3 Examine any material journal entries or other adjustments made
during the course of preparing the financial statements.
4 Carry out analytical procedures such as:
(a) comparison of the current figures with those of prior periods;
(b) review and comparison of key ratios or other performance
indicators.
5 Review the planned extent of reliance on internal controls in this
area and consider whether this remains appropriate.
89
6 Assess whether the initial materiality and/or risk assessment should
be revised in view of the audit evidence obtained. Record details of
any necessary adjustments. Consider the impact on the remainder of
the audit work and on any work undertaken to date.
7 Review for large and/or unusual items and verify.
8 Review of appropriateness and consistency of accounting policies
used by the entity.
9 Review capitalization policy which is in accordance with the
definition and satisfy recognition criteria

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W.P
required satisfactory Comments and
Ref
Y/N Y/N date
Existence/Completeness
10 Carry out physical inspection of investment property including both
current year additions and property purchased in previous years.
11 Where physical verification has not been undertaken, detail the
steps carried out to establish that all investment properties exist.
12 Ensure the completeness of investment property by :
(a) examining board minutes and
(b) identifying unrecorded liabilities
Ownership
13 (a) Confirm or inspect title deeds to all properties.
(b) Perform land search for properties situated both locally or
overseas.
(c) Inspect lease agreement or obtain direct confirmation from
bank or other custodian of investment properties.
Cost and Valuation
14 Ensure the entity has accounted for its investment property by
adopting the cost model or the fair value model.
15 Vouch additions to supporting documentation. Ensure that:
(a) the cost (or deemed cost*) is correctly recorded;
(b) they have been properly authorized;
(c) they are correctly classified;
(d) they are of a capital, not revenue, nature;
(e) the value has been correctly computed where they represent
the capitalization of items made internally; and
(f) assets acquired were delivered prior to the balance sheet date;
16 Ensure cost been correctly determined
17 Ensure the transfers to and from investment properties have been
properly accounted for under applicable accounting standards.

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required satisfactory W.P Ref Comments and
Y/N Y/N date
18 Vouch disposals to available evidence. Ensure that:
(a) sales proceeds have been correctly accounted for;
(b) profit /loss on disposal has been correctly calculated;
(c) they have been properly authorized;
(d) they have been removed from the asset register/listing.
19 Where the fair value model is being applied confirm that:
(a) the entity measures all of investment properties at fair value;
(b) supporting documentation exists for the valuation such as an
appraisal report or an estimate of fair value using an income
or depreciated replacement cost approach;
(c) any gain or loss arising from a change in fair value of
investment property is recognized in profit & loss in the
period in which it arises.
Impairment (Cost model)
20 Consider whether there are any indicators of impairment, which
might adversely affect the value of the assets, and ensure that these
have been dealt with in accordance with applicable accounting
standards.
(a) Where any such indication exists, enquire if the entity has
estimated the recoverable amount of assets (i.e. the higher of an
asset’s fair value less cost to sell and its value in use).
(b) Where an increase in carrying value is attributable to the
reversal of a previous impairment loss; confirm that the
carrying value (net of depreciation and amortization) does not
exceed the value at which the asset would have been stated had
no previous impairment loss been recognized.

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required satisfactory W.P Ref Comments and
Y/N Y/N date
Depreciation (Cost model)
21 In respect of the charge to depreciation
(a) Compare bases and rates of depreciation with accounting
policy note and ensure consistency.
(b) Have rates been considered for each significant part of asset
based on different useful life, rate of consumption and
separability etc.
(c) Review the methods applied and consider whether they are
appropriate to the pattern of consumption of the assets.
(d) Confirm that all assets are being depreciated in accordance
with the company’s accounting policy.
(e) Test check calculations or check reasonableness of
depreciation charge for the year/period.
(f) Ensure that no assets have been depreciated by more than the
lower of cost or residual value.
Foreign Currencies
22 Ensure the entity accounted for foreign currency transactions in
accordance with SLFRSs.
Presentation and disclosure
23 Confirm that a disclosure checklist will be completed for this year.
Where that is not the case, explain how the objectives relating to
disclosure will be achieved.
24 Ensure that there is sufficient appropriate evidence on the file to
support the disclosures made.
Uncorrected Misstatements

28 Identify and report all uncorrected misstatements.

Conclusion
29 Consider whether there are any points which need to be included
in a letter of representation or management letter.

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SMET 17D- Detail Audit Plan: Investment in Group

companies (including Associates and Joint Ventures)
Planning Final
Number Are you Comments Initials
of satisfied
Audit objectives key tests that the
which objectives
satisfy have been
objective* met?

1 To ensure that the company has good title to 9 Yes/No

all investments in group companies and
associated undertakings.
2 To ensure that investments in group and 10, 11, 12 Yes/No
associated undertakings are valued correctly,
with provision being made for any permanent
diminution in value.
3 To ensure that inter-company balances are 12 Yes/No
correctly recorded and adequate allowance for
impairment and or uncollectibility has been
made for any irrecoverable balances.
4 To ensure that investments in group companies 14, 15, 16 Yes/No
and associated undertakings are accounted for
correctly.
5 To confirm that all necessary disclosures 17, 18 Yes/No
concerning investments in group companies
and associated undertakings have been made
and that the information is appropriately
presented and described.

Planning conclusion
I am satisfied that from the tests planned sufficient appropriate evidence can be gained to satisfy the
objectives.

Prepared by: Date:

Reviewed by: Date:

Final conclusion
From the audit work carried out I confirm that:
- the work has been performed in accordance with the detail audit plan;
- the work performed and the results obtained have been adequately documented;
- all necessary information has been collected for the presentation and disclosure in the financial
statements.
- sufficient and appropriate evidence has been obtained to support the audit conclusion reached.

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- in my opinion investments in group companies are fairly stated/ *not fairly stated as described
below.

Prepared by: Date:

Reviewed by: Date:

* Delete if not applicable.

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Test Results Initials

required satisfactory W.P Ref Comments and
Y/N Y/N date
General
1 Agree opening balances to last year’s accounts.
2 Obtain and check, or prepare, a lead schedule for the current year’s
figures and reconcile this to the general ledger.
3 Examine any material journal entries or other adjustments made during
the course of preparing the financial statements.
4 Carry out analytical procedures such as:
(a) comparison of the current figures with those of prior periods;
(b) review and comparison of key ratios or other performance indicators.
5 Review the planned extent of reliance on internal controls in this area and
consider whether this remains appropriate.
6 Assess whether the initial materiality and/or risk assessment should be
revised in view of the audit evidence obtained. Record details of any
necessary adjustments. Consider the impact on the remainder of the audit
work and on any work undertaken to date.
7 Review for large and/or unusual items and verify.

8 Review of appropriateness and consistency of accounting policies used

by the entity.
Ownership/existence
9 Inspect share certificates, or obtain confirmation of ownership from third
party.

Cost/valuation

10 Vouch all current period/ year additions to supporting documentation.

11 (a) Obtain a copy of the latest management/audited accounts and assess

the value of the investment in their light.
(b) Obtain the market value at the reporting date where the investee
companies are listed.
12 Where an investment in a subsidiary is held for resale have the provisions
of relevant standard been applied?
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required satisfactory W.P Ref Comments and
Y/N Y/N date
Inter-company balances
13 (a) Ensure that all inter-company balances agree to the respective
accounts of those companies at the year end.
(b) Obtain confirmation where there any group companies are not
audited by the Firm.
(c) Consider the recoverability of amounts owed by group companies at
the reporting date, and assess if adequate allowance for impairment
and/ or uncollectibility has been made.
Accounting treatment
14 Review the accounting treatment of all subsidiaries, associates and joint
ventures and ensure that this is in accordance with relevant standards.
Foreign currencies
15 Ensure the entity accounted for foreign currency transactions in
accordance with SLFRSs
16 Confirm that all monetary assets/ liabilities have been translated at the
closing rate.
Presentation and disclosure
17 Confirm that a disclosure checklist will be completed for this year.
Where that is not the case explain how the objectives relating to
disclosure will be achieved.
18 Ensure that there is sufficient appropriate evidence on the file to support
the disclosures made in respect of investments in group companies
Uncorrected Misstatements
28 Identify and report all uncorrected misstatements.
Conclusion
29 Consider whether there are any points which need to be included in a
letter of representation or management letter.

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SMET 17E- Detail Audit Plan: Other Investments

Audit objectives Planning Final
Number Are you Comments Initials
of Satisfied
key tests that the
which objectives
satisfy have been
objective* met?
1 To ensure that the company has good title to all 8, 9
Yes/No
investments.
2 To ensure that investments are valued correctly, 10, 11, 12,
with provision being made for any permanent 13, 14 Yes/No
diminution in value.
3 To ensure that all income from investments has 15
Yes/No
been accounted for.
4 To ensure that investments and other instruments 16
are properly classified as either fixed or current Yes/No
assets and treatment is consistent.
5 To confirm that all necessary disclosures 17, 18
concerning investments have been made and that
Yes/No
the information is appropriately presented and
described.

Planning conclusion
I am satisfied that from the tests planned sufficient appropriate evidence can be gained to satisfy the
objectives.

Prepared by: Date:

Reviewed by: Date:

Final conclusion
From the audit work carried out I confirm that:
- the work has been performed in accordance with the detail audit plan;
- the work performed and the results obtained have been adequately documented;
- all necessary information has been collected for the presentation and disclosure in the financial
statements;
- sufficient and appropriate evidence has been obtained to support the audit conclusion reached; and
- in my opinion other investments are fairly stated/ *not fairly stated as described below.

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Prepared by: Date:

Reviewed by: Date:

* Delete if not applicable.

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Test Results Initials

required satisfactory W.P Ref Comments and
Y/N Y/N date
General
1 Agree opening balances to last year’s accounts.
2 Obtain and check, or prepare, a lead schedule for the current year’s
figures and reconcile this to the general ledger.
3 Examine any material journal entries or other adjustments made during
the course of preparing the financial statements.
4 Carry out analytical procedures such as:
(a) comparison of the current figures with those of prior periods;
(b) review and comparison of key ratios or other performance
indicators.
5 Review the planned extent of reliance on internal controls in this area
and consider whether this remains appropriate.
6 Assess whether the initial materiality and/or risk assessment should be
revised in view of the audit evidence obtained. Record details of any
necessary adjustments. Consider the impact on the remainder of the
audit work and on any work undertaken to date.
7 Review for large and/or unusual items and verify.
Ownership
8 Inspect documents of title such as share certificates. Ensure that:
(a) details are correctly recorded including name, number of shares,
type of shares (or equivalent information if not share based);
(b) the instrument is in the company name;

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required satisfactory W.P Ref Comments and
Y/N Y/N date
(c) where the company is not the registered owner such as where
employees of the company hold a nominee interest confirm:
- the company has a signed declaration from the said person
stating that he/she does not beneficially own the interest;
- a blank signed share transfer form or equivalent exists;
(d) all documents of title are held in a secure place;

(e) examine stamped bought and sold notes, stamped instruments of

transfer or other data supporting transactions such as brokers
advices;
9 Consider obtaining written confirmation where documents of title are
held by a third party.
Cost/valuation

10 Vouch additions to supporting documentation. Ensure that the:

(a) cost;

(b) company name; and

(c) number of shares have been correctly accounted for.

11 Vouch disposals to supporting documentation: Ensure that:
(a) sales proceeds have been correctly accounted for;
(b) profit/loss on disposal has been correctly computed;
(c) transactions have been properly authorized.

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required satisfactory W.P Ref Comments and
Y/N Y/N date
12 For listed investments:
(a) check the market values;
(b) consider whether any provision for diminution in value is
necessary.
13 For unlisted investments:
(a) obtain a copy of the latest accounts or other means of considering
valuation;
(b) consider whether any provision for diminution in value is
necessary.
14 Check that we have sufficient evidence regarding the valuation of any
long term investments.
Income
15 Refer to the available evidence (e.g., dividend slips) and check that
income and approved income have been correctly accounted for (NB
dates of disposal and acquisition).
Presentation and disclosure
16 Consider the nature of investments held and whether they have been
correctly classified and their treatment consistent.
17 Confirm that a disclosure checklist will be completed for this year.
Where that is not the case explain how the objectives relating to
disclosure will be achieved.
18 Check that we have sufficient evidence regarding the disclosure of any
complex financial instruments.
Uncorrected Misstatements
28 Identify and report all uncorrected misstatements.
Conclusion
29 Consider whether there are any points which need to be included in a
letter of representation or management letter.

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SMET 17F- Detail Audit Plan: Inventories

Planning Final
Number of Are you Comments Initials
key tests satisfied
Audit objectives
which that the
satisfy objectives
objective* have been
met?
1 To ensure that the company has good title 8, 9, 10
Yes/No
to inventories.
2 To ensure that all inventories exist. 11, 12, 13 Yes/No
3 To ensure that inventories have been 14, 15, 22
valued correctly, consistently and in
Yes/No
accordance with applicable legislation and
accounting standards.
4 To ensure that full provision has been 16, 17, 18,
made for all damaged, obsolete or slow 19, 20 Yes/No
moving inventories.
5 To ensure that cut-off has been strictly 21
Yes/No
applied.
6 To confirm that all necessary disclosures 23, 24
concerning inventories have been made
Yes/No
and that the information is appropriately
presented and described.

Planning conclusion
I am satisfied that from the tests planned sufficient appropriate evidence can be gained to satisfy the
objectives.
Prepared by: Date:
Reviewed by: Date:

Final Conclusion
From the audit work carried out I confirm that:
- the work has been performed in accordance with the detail audit plan;
- the work performed and the results obtained have been adequately documented;
- all necessary information has been collected for the presentation and disclosure in the financial
statements;
- sufficient and appropriate evidence has been obtained to support the audit conclusion reached; and
- in my opinion inventories are fairly stated/ *not fairly stated as described below.

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Prepared by: Date:

Reviewed by: Date:

* Delete if not applicable.

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required satisfactory W.P Ref Comments and
Y/N Y/N date
General
1 Agree opening balances to last year’s accounts.
2 Obtain and check, or prepare, a lead schedule for the current year’s
figures and reconcile this to the general ledger.
3 Examine any material journal entries or other adjustments made during
the course of preparing the financial statements.
4 Carry out analytical procedures such as:
(a) comparison of the current figures with those of prior periods;
(b) review and comparison of key ratios or other performance
indicators.
5 Review the planned extent of reliance on internal controls in this area
and consider whether this remains appropriate.
6 Assess whether the initial materiality and/or risk assessment should be
revised in view of the audit evidence obtained. Record details of any
necessary adjustments. Consider the impact on the remainder of the
audit work and on any work undertaken to date.
7 Review for large and/or unusual items and verify.
Ownership
8 Enquire if any of the inventories are held on behalf of third parties and
ensure that such items are excluded from the accounts. Where material,
obtain confirmation from the third party.
9 Where inventories are held by third parties on behalf of the company:
(a) obtain certificates where amounts are material; and
(b) consider matters as required by the auditing standards.
10 Consider whether any inventories held on consignment have been
accounted for.
Existence

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required satisfactory W.P Ref Comments and
Y/N Y/N date
11 Complete the physical inventory counting programme,(SMET 17I).
Trace all items selected at the count to the final inventory listings, and,
where appropriate, internal inventory records. Obtain explanations for
any differences.
12 Select a sample of items from the final inventory listings and trace to
the copies of the rough inventory listings taken during the physical
inventory counting.
13 Where there are material inventories that have not been physically
verified at the year-end physical inventory counting:
(a) take or observe some physical counts on an alternative date and,
where necessary, perform audit procedures on intervening
transactions.
(b) specify below any other audit work required to verify existence.
Valuation
14 Test the additions and extensions of the final inventory listings.
15 Ascertain the method used for valuing inventories and consider
whether:
(a) It has been correctly applied.
(b) It is an acceptable basis of valuation under applicable legislation
and accounting standards.
(c) It is consistent with previous years and with the company’s
accounting policy.

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required satisfactory W.P Ref Comments and
Y/N Y/N date
Provisions
16 Obtain details of the basis for making provisions and determine if it is
both adequate and consistent.
17 Where the client determines the provision on the basis of a formula
consider whether:
(a) it is appropriate for the nature of business;
(b) it is consistent;
(c) it has been accurately applied;
(d) where the formula relies on the age of the inventories, check to
ensure that the ageing is accurate.
18 Review the inventory listings and ensure that any items identified as
damaged, slow moving or obsolete have been correctly written down.
19 Review all inventories and consider whether any further provision is
necessary:
(a) whether production levels are falling;
(b) whether inventory levels are high in comparison to orders received
and anticipated demand;
(c) any fluctuations in cost or selling price;
(d) any likely change in technology or market demands.
20 Select a sample of inventories and compare costs to the selling price less
expenditure necessary for realization.
(a) Lines need to be examined individually. Losses on one line cannot
be set off against profits on another.
(b) Where a provision is made on a finished product consider whether
any provision should be made against unfinished units and
materials used in the process.

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required satisfactory W.P Ref Comments and
Y/N Y/N date
NB Expenditure necessary for realizing inventories should include a
proportion of marketing, selling and distribution expenses as well
as an allowance for scrap and reworking costs.
Cut-off
21 Review the results of the tests on cut-off carried out on trade
receivables and payables and ensure they provide adequate
assurance as to the accuracy of the year end cut-off.
Foreign currencies
22 Ensure that the entity accounted for foreign currency transactions
in accordance with SLFRSs.
Presentation and disclosure
23 Confirm that a disclosure checklist will be completed for this
year. Where that is not the case explain how the objectives
relating to disclosure will be achieved.
24 Ensure that there is sufficient appropriate evidence on the file to
support the disclosures made such as replacement value or
payments on account.
Uncorrected Misstatements
28 Identify and report all uncorrected misstatements.
Conclusion
29 Consider whether there are any points which need to be included
in a letter of representation or management letter.

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SMET 17G- Detail Audit Plan: Physical Inventory Counting

Test Results Initials

Nature of test: required satisfactory W.P Ref Comments and
Y/N Y/N date
General
1 Record the following details for each location visited:
(a) location(s) being counted;
(b) date(s) of count and attendance;
(c) types of inventories held at location;
(d) approximate value of inventories by category at location;
(e) details of any inventories at locations not covered by the count and any
alternative method used to verify their existence;
(f) brief description of the procedures adopted;
(g) names of client staff counting;
(h) names of audit staff taking part.
2 Ascertain and note whether:
(a) the teams were properly briefed prior to commencing the count;
(b) the teams only include people who are not responsible for the storing
and recording of inventories;
(c) inventories were counted by teams of two (one counting and one
checking and recording);
(d) the teams were asked to identify damaged, slow moving or obsolete
inventories;
(e) the teams were made aware of any inventories held on behalf of third
parties and these were excluded from the count.

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required satisfactory W.P Ref Comments and
Y/N Y/N date
Inventory Counting
3 Determine whether:
(a) the teams were counting and recording accurately;
(b) the counts were being controlled to ensure that all inventories
were counted and only once;
(c) there was adequate control over inventory listings to ensure
that they are all accounted for (e.g., pre-numbered).
4 Where serially numbered sheets are used, record the numbers of all
sheets used at the end of the count.
5 Select a sample of items from completed inventories sheets and
check to ensure that the number has been recorded properly. (These
should be followed through to final inventory listings at the final
audit).
6 Count a sample of inventories and ensure that they have been
recorded properly on the final inventory listings.
7 Where possible, copy or extract details of a sample of rough
inventory listings for checking at the final audit.
8 Where inventories are valued at selling price less mark-up, record
the shelf price of a number of inventories.
9 Ascertain whether any inventories are held on behalf of a third
party. Where applicable ensure that they have been separately
identified and excluded from the count.
10 Ascertain whether any inventories are held on consignment. Ensure,
where appropriate, a full record is made.
11 Note any old or damaged inventories during the count. Ensure that
they are marked as such on the final inventory listings.

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required satisfactory W.P Ref Comments and
Y/N Y/N date
Cut-off
12 Ensure that no movements in or out took place during the physical
inventory counting.
13 Record details of the last goods dispatch number and the last goods
received note number to follow up at the final audit.
Other work
14 Note any instances of the client's procedures not being satisfactorily
carried out or any other weaknesses that should be brought to the
attention of management.
15 Perform any other procedures that would normally be carried out at
the physical inventory counting;
(a) Select a sample of assets for verification from the fixed asset
register.
(b) Undertake a cash count.
(c) Other (specify):
Conclusion
16 Write a report on the physical inventory counting concluding on its
accuracy and our ability to rely on it.

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SMET 17H- Detail Audit Plan: Trade & Other Receivables

Planning Final
Number of Are you Are you
key tests Satisfied Satisfied
Audit objectives
which that the that the Comments Initials
satisfy objectives objectives
objective* have been have been
met met?
1 To ensure that trade receivables 9, 10, 11, 12,
are due at the value recorded. 13, 14, 15, 16, Yes/No
17, 28, 29
2 To ensure that adequate
allowance for impairment and
18, 19 Yes/No
/or uncollectibility has been
made for all receivables.
3 To ensure that proper cut-offs
20 Yes/No
has been made.
4 To ensure that prepayments and
loan receivables (including staff 21, 22, 23, 24,
Yes/No
and directors) are properly 25, 26, 27
valued, classified, and verified.
5 To confirm that all necessary
disclosures concerning
receivables have been made
30, 31, 32, 33 Yes/No
and that the information is
appropriately presented and
described.
Planning conclusion
I am satisfied that from the tests planned sufficient appropriate evidence can be gained to satisfy the
objectives.

Prepared by: Date:

Reviewed by: Date:

Final conclusion
From the audit work carried out I confirm that:
- the work has been performed in accordance with detail audit plan;
- the work performed and the results obtained have been adequately documented;
- all necessary information has been collected for the presentation and disclosure in the financial
statements;
- sufficient and appropriate evidence has been obtained to support the audit conclusion reached; and
- in my opinion trade and other receivables are fairly stated/ *not fairly stated as described below.

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* Delete if not applicable.

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required satisfactory W.P Ref Comments and
Y/N Y/N date
General
1 Agree opening balances to last year’s accounts.
2 Obtain and check, or prepare, a lead schedule for the current year’s
figures and reconcile this to the general ledger.
3 Examine any material journal entries or other adjustments made
during the course of preparing the financial statements.
4 Carry out analytical procedures such as:
(a) comparison of the current figures with those of prior periods;
(b) review and comparison of key ratios or other performance
indicators.
5 Review the planned extent of reliance on internal controls in this
area and consider whether this remains appropriate.
6 Assess whether the initial materiality and/or risk assessment should
be revised in view of the audit evidence obtained. Record details of
any necessary adjustments. Consider the impact on the remainder of
the audit work and on any work undertaken to date.
7 Review for large and/or unusual items and verify.
8 Review of appropriateness and consistency of accounting policies
used by the entity.
Cost/existence
9 Obtain or prepare an aged list of balances and test the casts.
10 Agree the aged list of balances to the control account. Obtain
explanations for all material adjustments to the control account.

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required satisfactory W.P Ref Comments and
Y/N Y/N date
11 Perform a circularization of trade receivables.
(a) Select a sample of accounts for confirmation from a complete list
of balances (include nil and credit balances where applicable).
Record the details on the standard working paper.
(b) Confirm with client the receivables you wish to circularise.
(c) Obtain explanations where the client does not want you to
circularize particular balances and consider alternative procedures
that can be applied.
(d) Consider whether the refusal to allow circularization of particular
balances will impose a limitation of scope on the audit?
(e) Send the confirmation requests. Enclose a prepaid envelope for
return to the firm. Ensure the reply part of the letter is properly
referenced.
(f) Record replies on the control sheet.
(g) Where replies are not received within a reasonable period send a
follow-up letter.
(h) Follow the alternative procedures for any unfavorable responses or
where no response obtained.
(i) Summarise the results and consider whether adequate audit
comfort has been obtained for trade debtors.
12 Where circularization has not been carried out select a sample of trade
receivables or where unsatisfactory results are obtained carry out
alternative procedures.
(a) Examine the ledger for cash after date;
(b) For unpaid items inspect proof of delivery or dispatch. If no such
documentation is available, inspect the sales invoice supporting
them; and
(c) Review correspondence files for items in (b) to determine whether
any disputes exist.

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required satisfactory W.P Ref Comments and
Y/N Y/N date
13 List all credit balances over LKR_________ and obtain explanations.
14 If the entity has retained substantially all the risks and rewards of
ownership of any transferred assets (e.g. discounted bills, factored
trade receivables), ensure the entity continues recognizing such assets
as receivables and that a financial liability is recognized for the
consideration received.
15 Trade receivables are normally treated as 'loans and receivables'
under LKAS 39 and carried at amortized cost using the effective
interest rate method. Where this is not the case ensure that the
presentation is in accordance with SLFRSs.
16 If trade receivable are classified as "loans and receivables":
(a) Ensure that they are carried at amortized cost in the balance
sheet;
(b) Identify if there is objective evidence that a trade receivable or
group of trade receivables is impaired after individual
assessment of trade receivables that are individually significant
and collective assessment of trade receivables that are not
individually significant; and
(c) Consider the estimates of "Present value of estimated future cash
flow" in determining the amortized cost by reference to Sri
Lanka Auditing Standards.
17 Check whether any gain or loss arising from a change in fair value is
recognized in the income statements for the period in which it arises.
18 Review ledger accounts and obtain a list of any debts with balances:
(a) not paid within … … … … months of the period end;
(b) in excess of their credit limit;
(c) in the hands of liquidators or receivers;
(d) in the hands of lawyers for collection.

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required satisfactory W.P Ref Comments and
Y/N Y/N date
19 Compare the client’s allowance for uncollectibility for trade
receivables with the list completed under 18 above and consider its
adequacy. Obtain explanations for and justify any material accounts
omitted from the client’s list.
Cut-off
20 Cut-off testing is covered in SMET 17Q.
Prepayments
Obtain a list of items included as prepayments:
(a) Test mathematical accuracy;
(b) Vouch all items over LKR by reference to the cash book and
invoices;
(c) Compare the list in detail to last year’s and enquire into any major
differences;
(d) Review the cash book, general ledger and profit and loss account
and ensure that all likely prepayments are included; and
(e) Review for reasonableness and verify significant/unusual items,
comparing with last year and expectations.
Deposits
Obtain a list of deposits and perform the following procedures:
(a) Ascertain the nature of the deposits and sight deposits receipts
ensure that they are:
! current;
! originals;
! in the name of the entity; and
! in the correct amount.
(b) Consider the outstanding amount of contract sum in relation to the
deposits paid for assets as capital commitments.
(c) Consider whether any allowance for impairment and / or
uncollectibility is necessary (see question 19).

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required satisfactory W.P Ref Comments and
Y/N Y/N date
Bills receivables
23 Obtain or prepare a list of bills receivables and perform the following
procedures:
(a) Obtain banking facilities letter to see if such facilities have been
granted by bank;
(b) Obtain a list of bills receivable balances;
(c) Check details of bills receivable balances to bills statements;
(d) Check the bills receivable balances to bank confirmation;
(e) Check subsequent settlement of bills receivable balances to bank
statements; and
(f) Consider whether any allowance for impairment and / or
uncollectibility is necessary (see question 19).
Other receivables
24 Obtain or prepare a list of other receivables:
(a) Vouch material items to supporting documentation;
(b) Compare with previous year and enquire into major differences;
(c) Ensure that other receivables are carried at amortized cost if they
are classified as "loans and receivable"
(d) Consider whether any allowance for impairment and / or
uncollectibility is necessary (see question 19); and
(e) Obtain confirmation from independent third party.
Loan receivable
25 Ensure that no loans have been made to directors unless within the
provisions of applicable legislation.
26 For loans made in the year:
(a) Obtain confirmations of loans receivable;
(b) Verify for loans in existence at the year end that:
- security exists and is in the hands of the company;
- the value of security is adequate;
- any provision against loans is adequate; and
- confirmations relating to the loans agree with the balances.

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required satisfactory W.P Ref Comments and
Y/N Y/N date
(c) Check that loans granted during the year are properly authorized;
(d) Check that loan repayments are received on the due date and
correctly recorded; and
(e) Check that interest on loans receivable is:
- correctly recorded;
- received on the due dates; and
- correctly accrued at the year end
(f) Consider whether any allowance for impairment and / or
uncollectibility is necessary (see part 19).
Long-term receivables/retentions
27 Where a receivable, or portion thereof is recoverable after more than
one year, consider:
(a) whether any allowance for impairment and / or uncollectibility is
necessary;
(b) whether adequate disclosure has been made;
(c) whether the receivable is properly accounted for under relevant
SLFRSs unless the fair value effect is immaterial; and
(d) whether a gain or loss arising from a change in the fair value is
recognized in the income statements for the period in which it
arise.
Foreign Currencies
28 Ensure the entity accounted for foreign currency transactions in
accordance with SLFRSs
29 Confirm that all monetary assets have been translated at the closing
rate.

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required satisfactory W.P Ref Comments and
Y/N Y/N date
Presentation and disclosure
30 Confirm that a disclosure checklist will be completed for this year.
Where that is not the case explain how the objectives relating to
disclosure will be achieved.
31 Ensure that there is sufficient appropriate evidence on the file to
support the disclosures made.
32 Review transactions and balances with directors and ensure they are
properly presented as related party transactions.
33 Ensure that any factored debts have been accounted for in
accordance with the substance of the agreement.
Uncorrected Misstatements
34 Identify and record all uncorrected misstatements.
Conclusion
35 Consider whether there are any points which need to be included in a
letter of representation or Management letter.

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SMET 17I- Detail Audit Plan: Cash & Bank Balances

Planning Final
Number of Reference Are you
key tests to bespoke Satisfied
Audit objectives
which tests to be that the Comments
Initials
satisfy carried out objectives
objective* have been
met?
1 To establish that all bank
balances and overdrafts have
9, 10, 17, 18 Yes/No
been included at the correct
amount.
2 To ensure that bank balances and
11, 12, 13 Yes/No
overdrafts are correctly disclosed.
3 To ensure that cash balances are
14, 15, 16,
genuine and have been included Yes/No
17, 18
at the correct amount.
4 To confirm that all necessary
disclosures concerning bank and
cash balances have been made
19, 20, 21 Yes/No
and that the information is
appropriately presented and
described.

Planning conclusion
I am satisfied that from the tests planned sufficient appropriate evidence can be gained to satisfy the
objectives.

Prepared by: Date:

Reviewed by: Date:

Final conclusion
From the audit work carried out I confirm that:
- the work has been performed in accordance with the audit programme;
- the work performed and the results obtained have been adequately documented;
- all necessary information has been collected for the presentation and disclosure in the financial
statements;
- sufficient and appropriate evidence has been obtained to support the audit conclusion reached; and
- in my opinion (subject to matters highlighted on B5 or B8)* bank and cash are fairly stated/ *not
fairly stated as described below.

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Prepared by: Date:

Reviewed by: Date:

*Delete if not applicable.

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W.P
required satisfactory Comments and
Ref
Y/N Y/N date
General
1 Agree opening balances to last year’s accounts.
2 Obtain and check, or prepare, a lead schedule for the current year’s
figures and reconcile this to the general ledger.
3 Examine any material journal entries or other adjustments made during
the course of preparing the financial statements.
4 Carry out analytical procedures such as:
(a) comparison of the current figures with those of prior periods;
(b) review and comparison of key ratios or other performance indicators.
5 Review the planned extent of reliance on internal controls in this area
and consider whether this remains appropriate.
6 Assess whether the initial materiality and/or risk assessment should be
revised in view of the audit evidence obtained. Record details of any
necessary adjustments. Consider the impact on the remainder of the audit
work and on any work undertaken to date.
7 Review for large and/or unusual items and verify.
8 Review of appropriateness and consistency of accounting policies used
by the entity.
Valuation and existence
9 Obtain bank confirmations for all bank accounts open at any time during
the year
10 Obtain or prepare bank reconciliations for all accounts and verify:
(a) Check bank balances to bank statement and bank confirmation;
(b) Check cash book balance to general ledger;
(c) Check casting of the reconciliations;
(d) Check a sample of uncleared items through to the new period
(noting dates). Obtain reason where any item has taken longer than
expected to clear; and
(e) Obtain explanations and substantiate all adjustments on the bank
reconciliations.

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required satisfactory W.P Ref Comments and
Y/N Y/N date
11 Ensure that all matters dealt with in the bank confirmations have been
referenced to the relevant schedule/sections.
12 Ensure that bank balances and overdrafts are only netted off where a
formal right of set-off exists.
13 Ensure that the company has not exceeded any restrictions on borrowing
powers imposed in the Articles of Association or any loan agreement.
Cash
14 For businesses receiving cash income, ensure unbanked takings before
and after the year end have been accounted for in the correct period.
15 For businesses receiving cash income, ensure that all unbanked takings
at the year end have been timeously banked in the new period.
16 Obtain certificates for all cash balances not counted.
Foreign Currencies
17 Ensure the entity accounted for foreign currency transactions in
accordance with SLFRSs.
18 Confirm that all monetary assets have been translated at the closing rate.
Presentation and disclosure
19 Confirm that a disclosure checklist will be completed for this year.
Where that is not the case explain how the objectives relating to
disclosure will be achieved.
20 Ensure that there is evidence on the file to support all disclosures made.
21 Review the bank confirmations and correspondence and ensure that all
necessary disclosures have been made.
Uncorrected Misstatements
22 Identify and record all uncorrected misstatements
Conclusion
23 Consider whether there are any points which need to be included in a
letter of representation or management letter

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SMET 17J- Detail Audit Plan: Equity

Planning Final
Number Reference Are you Comments Initials
of to bespoke satisfied
Audit objectives key tests tests to be that the
which carried out objectives
satisfy have been
objective* met?
1 To ensure that the statutory records 9, 10, 11, Yes/No
have been properly maintained and 12, 13, 14,
are up-to-date. 15
2 To ensure that any changes in 20, 21, 22, Yes/No
stated capital are supported by 23, 29
appropriate resolutions and are
properly reflected in the financial
statements.
3 To ensure that capital instruments 16, 17, 18, Yes/No
and the related interest or dividends 19, 24, 25,
are properly presented in 26, 27, 28,
accordance with the substance of 29
the arrangements.
4 To confirm that all necessary 29, 31 Yes/No
disclosures concerning reserves and
other statutory information have
been made and that they are
appropriately presented and
described.

Planning conclusion
I am satisfied that from the tests planned sufficient appropriate evidence can be gained to satisfy the
objectives.
Prepared by: Date:
Reviewed by: Date:

Final conclusion
From the audit work carried out I confirm that:
- the work has been performed in accordance with the audit programme;
- the work performed and the results obtained have been adequately documented;
- all necessary information has been collected for the presentation and disclosure in the financial
statements;
- sufficient and appropriate evidence has been obtained to support the audit conclusion reached; and
- in my opinion stated capital and reserves are fairly stated/ * not fairly stated as described below.

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Reviewed by: Date:

* Delete if not applicable.

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Ref/
required satisfactory W.P Ref and
Comments
Y/N Y/N date
General
1 Agree opening balances to last year’s accounts.
2 Obtain and check, or prepare, a lead schedule for the current year’s
figures and reconcile this to the general ledger.
3 Examine any material journal entries or other adjustments made
during the course of preparing the financial statements.
4 Carry out analytical procedures such as:
(a) comparison of the current figures with those of prior periods;
(b) review and comparison of key ratios or other performance
indicators.
5 Review the planned extent of reliance on internal controls in this area
and consider whether this remains appropriate.
6 Assess whether the initial materiality and/or risk assessment should be
revised in view of the audit evidence obtained. Record details of any
necessary adjustments. Consider the impact on the remainder of the
audit work and on any work undertaken to date.
7 Review for large and/or unusual items and verify.
8 Review of appropriateness and consistency of accounting policies
used by the entity.
Statutory records
9 Perform company search and obtain copies of statutory records for
this period.
10 Obtain a copy of the Memorandum and Articles of Association
("M&A").
11 Inspect original statutory records for this period and up to the date of
auditor's report.

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Ref/
required satisfactory W.P Ref and
Comments
Y/N Y/N date
12 Ensure that all changes in directors and secretaries and their interests in
shares or debentures have been properly authorized and entered into the
relevant register.
13 Ensure that all charges have been entered into the relevant register.
14 Agree details in the share/director/charges register to:
(a) the financial statements;
(b) the annual return; and
(c) the directors’ report.
15 Review minutes for:
(a) proper approval and authorization for additions, disposals,
impairment loss provided and reversal of impairment loss on assets
during the year;
(b) major contracts or capital commitments;
(c) changes in stated capital;
(d) dividend proposed and distribution;
(e) changes in directorship, secretary, shareholding;
(f) proper approval and authorization for loan advance from / to; and
(g) other matters that may affect the audit.
Dividends
16 Where a dividend is proposed or has been paid in the period, consider
whether the distribution is properly authorized and paid out of profits:
(a) check calculation and the payment for cash dividend; and
(b) ensure proper amount has been transferred from retained profits to
the stated capital accounts for stock dividend
17 Where a dividend is illegal consider whether:
(a) this is adequately disclosed in the accounts; and
(b) a debtor or contingent asset should be shown.
18 Have interest, dividends, losses or gains relating to a financial instrument
or a component that is a financial liability been recognized as income or
an expense in the income statement?

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W.P Ref/
required satisfactory and
Ref Comments
Y/N Y/N date
19 Have distributions to holders of equity instruments been debited directly
to equity?
Stated capital
20 Check authorized share capital with M & A or resolution for subsequent
increase.
21 Record details of any changes in stated capital in this period and ensure
that these have been properly authorized and reflected in the financial
statements.
22 Check evidence for receipt of consideration for shares issued in the
period.
23 For capital instruments issued in the period, have these (or their
components) been classified on initial recognition as a financial liability,
a financial asset or an equity instrument in accordance with the substance
of the contractual arrangement and the definitions of a financial liability,
a financial asset and an equity instrument?
Share-based payments
24 Ensure share-based payment are verified and properly accounted for in
accordance with SLFRSs
Other financial instruments
25 Have the different components of compound financial instruments been
classified separately as financial liabilities, financial assets or equity
instruments in accordance with SLFRSs?
26 When a derivative financial instrument gives one party a choice over
how it is settled has it been treated as a financial asset or a financial
liability except where all of the settlement alternatives would result in it
being an equity instrument?
Reserves
27 Review schedule of all movements in reserves.

(a) Ensure that transfers between reserves are correctly treated and
authorized.
(b) Ensure that the treatment in the financial statements is correct.

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Ref/
required satisfactory W.P Ref and
Comments
Y/N Y/N date
(c) Ensure prior-year adjustment are properly reflected in the reserve
Foreign currencies
28 Ensure the entity accounted for foreign currency transactions in
accordance with SLFRSs
Control
29 Ascertain details of the ultimate controlling party as required by LKAS
24 and ensure that correct disclosure is made in the financial statements.
Uncorrected Misstatements
30 Identify and record all uncorrected misstatements
Conclusion
31 Consider whether there are any points which need to be included in a
letter of representation or management letter.

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SMET 17K- Detail Audit Plan: Long term Loans & deferred
income
Planning Final
Number Reference Are you
of to bespoke Satisfied
Audit objectives
key tests tests to be that the Comments
Initials
which carried out objectives
satisfy have been
objective* met?
1 To ensure that all material loans 9, 10, 11, Yes/No
have been correctly accounted for. 12, 13, 14,
15, 16, 17,
19, 20
2 To ensure that deferred income has 18, 19, 20 Yes/No
been correctly accounted for and is
complete.
3 To confirm that all necessary 21, 22 Yes/No
disclosures concerning long term
loans and deferred income have
been made and that the
information is appropriately
presented and described.

Planning conclusion
I am satisfied that from the tests planned sufficient appropriate evidence can be gained to satisfy the
objectives.
Prepared by: Date:

Reviewed by: Date:

Final conclusion
From the audit work carried out I confirm that:
- the work has been performed in accordance with the audit programme;
- the work performed and the results obtained have been adequately documented;
- all necessary information has been collected for the presentation and disclosure in the financial
statements;
- sufficient and appropriate evidence has been obtained to support the audit conclusion reached; and
- in my opinion long term loans and deferred income are fairly stated/ *not fairly stated as
described below.

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Reviewed by: Date:

* Delete if not applicable.

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required satisfactory W.P Ref Comments and
Y/N Y/N date
General
1 Agree opening balances to last year’s accounts.
2 Obtain and check, or prepare, a lead schedule for the current year’s
figures and reconcile this to the general ledger.
3 Examine any material journal entries or other adjustments made
during the course of preparing the financial statements.
4 Carry out analytical procedures such as:
(a) comparison of the current figures with those of prior periods;
(b) review and comparison of key ratios or other performance
indicators.
5 Review the planned extent of reliance on internal controls in this area
and consider whether this remains appropriate.
6 Assess whether the initial materiality and/or risk assessment should
be revised in view of the audit evidence obtained. Record details of
any necessary adjustments.. Consider the impact on the remainder of
the audit work and on any work undertaken to date.
7 Review for large and/or unusual items and verify.
8 Review of appropriateness and consistency of accounting policies
used by the entity.
Loans
9 Obtain direct confirmation from lenders and confirm that other
matters such as security have been dealt with.
10 Review loan agreements and consider the implications of any breach
of covenants.
11 Check supporting evidence for loan advance and repayment during
the year.
12 Calculate the apportionment of loan between non-current and current
portion.
13 Determine split of loans between secured/unsecured and interest
bearing/non-interest bearing.
14 Verify interest charged for the period and the adequacy of accrued
interest.

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required satisfactory W.P Ref Comments and
Y/N Y/N date
15 Confirm that loans payable more than one year are from the balance
sheet date are measured in accordance with relevant SLFRSs.
16 Ensure the completeness of loans by :
(a) examining board minutes
(b) reviewing bank confirmation and other correspondences
(c) identifying unrecorded liabilities
Deferred income
17 Review the basis for deferring income:
(a) vouch to supporting documents; and
(b) ensure that it is valid, complete and has been correctly and
consistently applied with the prior year.
Foreign currencies
18 Ensure the entity accounted for foreign currency transactions in
accordance with SLFRSs
19 Confirm that all monetary liabilities have been translated at the
closing rate.
Presentation and disclosure
20 Confirm that a disclosure checklist will be completed for this year.
Where that is not the case explain how the objectives relating to
disclosure will be achieved.
21 Ensure that there is sufficient appropriate evidence on the file to
support all disclosures made.
Uncorrected Misstatements
22 Identify and record all uncorrected misstatements
Conclusion
23 Consider whether there are any points which need to be included in a
letter of representation or management letter

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SMET 17L- Detail Audit Plan: Trade Payables

Planning Final
Number Are you
of Reference Satisfied
Audit objectives
key tests to bespoke that the
Comments Initials
which tests to be objectives
satisfy carried out have been
objective* met?
1 To ensure that liabilities exist and are
supported by satisfactory independent 9, 10 Yes/No
evidence.
2 To ensure that trade payables have been 11, 12, 13,
fully and accurately recorded. 14, 15, 16, Yes/No
28, 29
3 To ensure that proper cut-off has been
17 Yes/No
applied.
4 To ensure that all hire purchase and
18, 19, 20,
finance leases have been accounted for
21, 22, 28, Yes/No
in accordance with applicable
29
accounting standards.
5 To ensure that all material accruals, 23, 24, 25,
loans and other payables have been 26, 27, 28, Yes/No
properly accounted for. 29
6 To confirm that all necessary
disclosures concerning payables have
30, 31 Yes/No
been made and that the information is
appropriately presented and described.

Planning conclusion
I am satisfied that from the tests planned sufficient appropriate evidence can be gained to satisfy the
objectives.

Prepared by: Date:

Reviewed by: Date:

Final conclusion
From the audit work carried out I confirm that:
- the work has been performed in accordance with the audit programme;
- the work performed and the results obtained have been adequately documented;
- all necessary information has been collected for the presentation and disclosure in the financial
statements;
- sufficient and appropriate evidence has been obtained to support the audit conclusion reached; and
- in my opinion trade and other payables are fairly stated/ *not fairly stated as described below.

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Prepared by: Date:

Reviewed by: Date:

* Delete if not applicable.

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required satisfactory W.P Ref Comments and
Y/N Y/N date
General
1 Agree opening balances to last year’s accounts.
2 Obtain and check, or prepare, a lead schedule for the current year’s
figures and reconcile this to the general ledger.
3 Examine any material journal entries or other adjustments made
during the course of preparing the financial statements.
4 Carry out analytical procedures such as:
(a) comparison of the current figures with those of prior periods;
(b) review and comparison of key ratios or other performance
indicators.
5 Review the planned extent of reliance on internal controls in this area
and consider whether this remains appropriate.
6 Assess whether the initial materiality and/or risk assessment should
be revised in view of the audit evidence obtained. Record details of
any necessary adjustments. Consider the impact on the remainder of
the audit work and on any work undertaken to date.
7 Review for large and/or unusual items and verify.
8 Review of appropriateness and consistency of accounting policies
used by the entity.
Existence
9 Obtain or prepare a list of trade payables. Agree the list to the control
account. Obtain explanations for all material adjustments to the
control account.
10 Test the casts of the list.
Completeness
11 List all debit balances over LKR_______ and obtain explanations.
Ensure they are correctly treated in the accounts.

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required satisfactory W.P Ref Comments and
Y/N Y/N date
12 Perform a trade payables' circularization:
(a) Select a sample of accounts from a complete list of balances for
example an activity report (include nil and debit balances where
applicable). Record the details on the standard working paper;
(b) Confirm with client the trade payables you wish to circularize;
(c) Obtain explanations where the client does want you to
circularise particular balances and consider alternative
procedures that can be applied;
(d) Consider whether the refusal to allow circularization of
particular balances will impose a limitation of scope on the
audit?
(e) Send the confirmation requests. Enclose a prepaid envelope for
return to the firm. Ensure the reply part of the letter is properly
referenced;
(f) Record replies on the control sheet;
(g) Where replies are not received within a reasonable period send
a follow-up letter;
(h) Follow the alternative procedures for any unfavorable
responses or where no response is obtained; and
(i) Summarise the results and consider whether adequate audit
comfort has been obtained for trade payables.
13 Where a circularization is not carried out, or the results are
unsatisfactory, test trade payables for completeness as follows:
(a) obtain the year end trade payables listing;
(b) compare to prior year to identify obvious omissions;
(c) review purchase day book during the year and payments after
the end to identify main suppliers;
(d) review purchase YTD information where available to identify
major suppliers;

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required satisfactory W.P Ref Comments and
Y/N Y/N date
(e) enquire to major suppliers not on the list. Ensure the list is in
fact complete;
(f) enquire into low balances with major suppliers to ensure they
are complete;
(g) obtain the file for year end supplier statements. Check a sample
and agree/reconcile to the list of balances;
(h) for major suppliers (regardless of recorded balance outstanding)
and for all material recorded balances, identify the related
statement and agree/reconcile to the creditors’ listing;
(i) where a statement is not available for any major supplier(s)
consider faxing a request for a copy statement;
(j) review after-date payments. Ensure those paying off pre-year
end items are included in creditors;
(k) extend the scope of (i) above if statements are not retained for
all suppliers.
14 Review invoices in the new period to ensure all material amounts
have been provided for.
Valuation
15 Where trade payables are valued on a basis other than amortized
cost using the effective interest method, ensure that the treatment
complies with the requirements of relevant SLFRSs.
16 Where trade payables are carried at amortized cost, consider the
present value of estimated future cash flow in determining the
amortized cost by reference to SLAuSs
Cut-off
17 Cut-off test is covered in SMET 17Q
Leasing
18 Review the treatment of all operating and finance leases.
(a) Confirm that the distinction between operating and finance
leases has been properly applied;
(b) Consider any new agreements and ensure that the accounting
treatment is in accordance with SLFRSs; and

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required satisfactory W.P Ref Comments and
Y/N Y/N date
(c) Confirm that any assets, liabilities or finance charges are in
accordance with SLFRSs.
19 Have any sale and lease back transactions in the period been
identified and accounted for under SLFRSs as an operating or
finance lease as appropriate?
20 Obtain direct confirmation of relevant details of loans payable.
21 Physically inspect the asset, if possible, or determine that the asset
exists and is in use by the client.
Bills payable
22 Perform the following procedures:
(a) Obtain banking facilities letter to see if such facilities have been
granted by bank;
(b) Obtain a list of bills payable balances;
(c) Check details of bills payable balances to bills statements; and
(d) Check the bills payable balances to bank confirmation.
Accruals
23 Review accruals for completeness comparing to:
(a) last year’s list;
(b) expectations.
Income Taxes
24 Agree the current tax liability to SMET17O
Provisions
25 Carry out audit tests as detailed in SMET17P
Other payables
26 Vouch any material other payables to supporting documentation and
ensure that other payables are carried at amortized cost.
Foreign Currencies
27 Ensure the entity accounted for foreign currency transactions in
accordance with SLFRSs.

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required satisfactory W.P Ref Comments and
Y/N Y/N date
28 Confirm that all monetary liabilities have been translated at the
closing rate.
Presentation and disclosure
29 Confirm that a disclosure checklist will be completed for this year.
Where that is not the case explain how the objectives relating to
disclosure will be achieved.
30 Ensure that there is sufficient appropriate evidence on the file to
support all disclosures made.
Uncorrected Misstatements
31 Identify and record all uncorrected misstatements
Conclusion
32 Consider whether there are any points which need to be included in
a letter of representation or management letter.

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SMET 17M- Detail Audit Plan: Income Taxes

Planning Final
Number Reference Are you Comments Initials
of to bespoke Satisfied
Audit objectives
key tests tests to be that the
which carried out objectives
satisfy have been
objective* met?
1 To ensure that the current tax is 9, 10, 11, Yes/No
computed and accounted for in 12, 13
accordance with applicable
regulations and financial reporting
standards respectively.
2 To ensure that deferred taxation has 14, 15, 16, Yes/No
been correctly accounted for. 17
3 To confirm that all necessary 18, 19, 20, Yes/No
disclosures concerning current and 21
deferred tax have been made and that
the information is appropriately
presented and described.

Planning conclusion
I am satisfied that from the tests planned sufficient appropriate evidence can be gained to satisfy the
objectives.

Prepared by: Date:

Reviewed by: Date:

Final conclusion
From the audit work carried out I confirm that:
- the work has been performed in accordance with the audit programme
- the work performed and the results obtained have been adequately documented
- all necessary information has been collected for the presentation and disclosure in the financial
statements.
- sufficient and appropriate evidence has been obtained to support the audit conclusion reached.
- in my opinion (income taxes are fairly stated/ * not fairly stated as described below.

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Prepared by: Date:

Reviewed by: Date:

* Delete if not applicable.

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required satisfactory W.P Ref Comments and
Y/N Y/N date
General
1 Agree opening balances to last year’s accounts.
2 Obtain and check, or prepare, a lead schedule for the current year’s figures
and reconcile this to the general ledger.
3 Examine any material journal entries or other adjustments made during the
course of preparing the financial statements.
4 Carry out analytical procedures such as:
(a) comparison of the current figures with those of prior periods;
(b) review and comparison of key ratios or other performance indicators.
5 Review the planned extent of reliance on internal controls in this area and
consider whether this remains appropriate.
6 Assess whether the initial materiality and/or risk assessment should be
revised in view of the audit evidence obtained. Record details of any
necessary adjustments. Consider the impact on the remainder of the audit
work and on any work undertaken to date.
7 Review for large and/or unusual items and verify.
8 Review of appropriateness and consistency of accounting policies used by
the entity.
Current tax
9 Obtain and check, or prepare the following:
(a) draft tax computations;
(b) an analysis of movement on the current tax account (including local
tax and overseas tax); and
(c) a proof of tax/tax reconciliation in the form required by SLFRSs.
10 For the movement of the current tax account (both local tax and overseas
tax):
(a) test for mathematical accuracy;
(b) check the amounts paid during the current period to bank statements
and copies of assessments and compare refunds received to
correspondence;

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W.P
required satisfactory Comments and
Ref
Y/N Y/N date
(c) review the current position on agreement of tax computations
with relevant tax authorities; and
(d) obtain details of any significant matters currently outstanding
with the tax authorities.
11 Verify the computation of the tax charges (both local tax and overseas
tax):
(a) obtain or prepare analyses of expense accounts which may
contain items that are disallowable, restricted, or result in
temporary differences, e.g.:
- travel / entertainment
- subscriptions
- sundries
- legal / professional fees
- repairs / maintenance (for capital items)
- hire charges (for expensive motor vehicles); and
- payments under finance leases
(b) Check calculation of capital allowances;
(c) Verify the mathematical accuracy of the computations; and
(d) Review the allocation of the tax charge to income tax and other
taxes.
12 Ensure profit before tax used in the computation agrees to draft profit
and loss account.
13 Have current tax liabilities (assets) for the current and prior periods
been measured at the amount expected to be paid to (recovered from)
the taxation authorities, using the tax rates (and tax laws) that have
been enacted or substantively enacted by the balance sheet date?
Deferred taxation
14 Except where permitted has a deferred tax liability been recognized
for all taxable temporary differences?
15 Has a deferred tax asset been recognized for all deductible temporary
differences only to the extent that it is probable that taxable profit
will be available against which the deductible temporary difference
can be utilized?

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required satisfactory W.P Ref Comments and
Y/N Y/N date
16 Has a deferred tax asset been recognized for the carry forward of
unused tax losses and unused tax credits only to the extent that it is
probable that future taxable profits will be available against which the
unused tax losses and unused tax credits can be utilized.
17 Have deferred tax assets and liabilities been measured at the tax rates
that are expected to apply to the period when the asset is realized or the
liability is settled, based on tax rates (and tax laws) that have been
enacted or substantively enacted by the balance sheet date?
Presentation and disclosure
18 Are there tax assets and tax liabilities that were offset and presented on
a net basis? If yes, ensure these tax assets and liabilities meet the right
to offset in accordance with SLFRSs.
19 Confirm that a disclosure checklist will be completed for this year.
Where that is not the case explain how the objectives relating to
disclosure will be achieved.
20 Ensure that there is sufficient appropriate evidence on the file to
support all disclosures made.
21 Have current tax and deferred tax been charged or credited directly to
equity (e.g. surplus from revaluation of assets) where the tax relates to
items that are credited or charged, in the same or a different period,
directly to equity?
Uncorrected Misstatements
22 Identify and record all uncorrected misstatements
Conclusion
23 Consider whether there are any items which need to be included in a
letter of representation or management letter.

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SMET 17N- Detail Audit Plan: Provisions & Contingent

Liabilities
Planning Final
Number of Reference Are you Comments Initials
key tests to bespoke satisfied
Audit objectives
which tests to be that the
satisfy carried out objectives
objective* have been
met?
1 To ensure that full provision has 9, 10, 11, Yes/No
been made for all liabilities or losses 12, 13, 14,
which are likely to be incurred, or 15, 22, 23
certain to be incurred, but uncertain
as to the amount or date on which
they will arise.
2 To ensure that all contingent 16, 17, 18, Yes/No
liabilities have been identified and 19
adequate provision made.
3 To ensure that capital and other 20, 21 Yes/No
commitments have been properly
accounted for.
4 To confirm that all necessary 24, 25, 26 Yes/No
disclosures concerning provisions,
contingent liabilities and
commitments have been made and
that the information is appropriately
presented and described.

Planning conclusion
I am satisfied that from the tests planned sufficient appropriate evidence can be gained to satisfy the
objectives.
Prepared by: Date:

Reviewed by: Date:

Final conclusion
From the audit work carried out I confirm that:
- the work has been performed in accordance with the audit programme;
- the work performed and the results obtained have been adequately documented;
- all necessary information has been collected for the presentation and disclosure in the financial
statements;
- sufficient and appropriate evidence has been obtained to support the audit conclusion reached; and
- in my opinion provisions for liabilities and charges, contingent liabilities and financial commitments
are fairly stated/ *not fairly stated as described below.

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Prepared by: Date:

Reviewed by: Date:

* Delete if not applicable.

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required satisfactory W.P Ref Comments and
Y/N Y/N date
Provisions for liabilities and charges

General
1 Agree opening balances to last year’s accounts.
2 Obtain and check, or prepare, a lead schedule for the current year’s
figures and reconcile this to the general ledger.
3 Examine any material journal entries or other adjustments made
during the course of preparing the financial statements.
4 Carry out analytical procedures such as:
(a) comparison of the current figures with those of prior periods;
(b) review and comparison of key ratios or other performance
indicators.
5 Review the planned extent of reliance on internal controls in this area
and consider whether this remains appropriate.
6 Assess whether the initial materiality and/or risk assessment should be
revised in view of the audit evidence obtained. Record details of any
necessary adjustments. Consider the impact on the remainder of the
audit work and on any work undertaken to date.
7 Review for large and/or unusual items and verify.
8 Review of appropriateness and consistency of accounting policies
used by the entity.
Liabilities and contingent liabilities
9 (a) Review obligations under pension and similar post-retirement
schemes, obtain a copy of the scheme rules or policies and ensure
that adequate provision has been made.

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required satisfactory W.P Ref Comments and
Y/N Y/N date
(b) Where the company operates a pension scheme discuss the
administration under relevant regulatory bodies, reporting and
whistle-blowing obligations with the directors/ trustees to ensure its
affairs are being properly administered.
10 Obtain or prepare a list of other obligations of uncertain timing and
amount existing at the balance sheet date. Ensure its completeness by
reviewing:
(a) the previous year’s provisions and contingent liabilities;
(b) items recorded on the bank confirmations and/or banking facilities
letter;
(c) minutes of meetings;
(d) major contracts;
(e) client's correspondence; and
(f) documents regarding legal cases; and
(g) other (specify)
11 Discuss the list with the client and ensure that it is complete and that
adequate provision has been made for likely losses.
12 Perform search for unrecorded liabilities
13 Review the list in 9 above for contingent liabilities and discuss with the
entity and ensure that it is complete and that adequate disclosure has
been made for all contingent liabilities.
Recognition
14 Review the treatment of all provisions and contingent liabilities and
ensure that:
(a) A provision is recognized when and only when there is a present
obligation in respect of a past event, it is probable that there will be
an outflow of resources, and this can be estimated reliably; and
(b) Contingent liabilities do not satisfy the criteria in (a) above and are
properly disclosed unless the possibility of an outflow of resources
is remote.
15 Consider reasonableness of assumptions and bases used to estimate the
amount of provisions and obligations.

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W.P
required satisfactory Comments and
Ref
Y/N Y/N date
Laws and regulations
16 (a) Enquire of the directors whether they are on notice of any possible
instances fraud or of other noncompliance with such laws or
regulations;
(b) Update the permanent audit file for any changes identified since the
planning stage;
(c) Review correspondence files of any relevant licensing or regulatory
authorities for any indications of breaches of laws and regulations;
(d) Confirm compliance with those laws and regulations that could
have a material impact on the accounts by completing the tests set
out in the audit approach column of the register of laws and
regulations and;
(e) Draft specific representations for inclusion in the letter of
representation.
Litigations and claims
17 To identify any possible claims or litigation against the entity and
consider whether the matters have been adequately and properly
accounted for in the financial statements:
(a) Make appropriate inquiries of management including obtaining
representations;
(b) Review minutes of those charged with governance and
correspondence with the entity's legal advisers;
(c) Examine legal expense accounts;
(d) Write to company's legal advisers enquiring about the status and
possible outcome of any legal cases; and
(e) Use any information obtained regarding the entity's business such as
other third party evidence (for example, newspaper) and discussion
with in-house legal counsel (where appointed) for any possible
claims and litigations

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W.P
required satisfactory Comments and
Ref
Y/N Y/N date
18 Where actual or potential litigation or claims against the entity have been
identified consider whether direct communication with the entity’s legal
advisers is required.
19 If permission is refused by management to contact the entity's legal advisers
directly: consider the impact on the audit opinion.
Capital and other commitments
20 Review the management's minutes, invoices (capital expenditure committed
before and after year end), contracts, agreements or other documents and
ensure that all material capital commitments have been identified as follows:
(a) contracted but not provided for.
(b) authorized but not contracted for.
21 Obtain details of future commitments under operating leases and ensure they
are correctly disclosed.
Foreign currencies
22 Ensure the entity accounted for foreign currency transactions in accordance
with SLFRSs.
23 Confirm that all monetary liabilities have been translated at the closing rate.
Presentation and disclosure
24 Confirm that a disclosure checklist will be completed for this year. Where
that is not the case explain how the objectives relating to disclosure will be
achieved.
25 Ensure that there is sufficient appropriate evidence on the file to support all
disclosures made.
26 Where disclosures about provisions or contingent liabilities include
management's opinion on an issue ensure that these opinions are confirmed
in the letter of representation.
Uncorrected Misstatements
27 Identify and record all uncorrected misstatements.
Conclusion
28 Consider whether there are any points (in addition to laws and regulations)
which need to be included in a letter of representation or management letter

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SMET 17O- Detail Audit Plan: Income Statements

Planning Final
Number of Reference Are you Comments Initials
key tests to bespoke satisfied
which tests to be that the
Audit objectives
satisfy carried out objectives
objective* have been
met?
1 To ensure that income is fairly 9, 10, 11,
stated and correctly classified. 12, 13, 14,
15, 16, 17, Yes/No
18, 19, 20,
21, 22, 23
2 To ensure that expenditure is 24, 25, 26,
fairly stated, authorized and 27, 28 Yes/No
correctly classified.
To ensure that wages and 29, 30, 31,
3
salaries are correctly accounted 32, 33, 34,
Yes/No
for. 35, 39, 40,
41
4 To ensure that items requiring 36, 37, 38
specific disclosure are correctly Yes/No
reported.
5 To ensure that any share based 42, 43, 44,
payments are properly accounted 45 Yes/No
for.
6 To confirm that all necessary 36, 37, 38,
disclosures concerning the profit 46, 47
and loss account have been made
Yes/No
and that the information is
appropriately presented and
described.

Planning conclusion
I am satisfied that from the tests planned sufficient appropriate evidence can be gained to satisfy the
objectives.

Prepared by: Date:

Reviewed by: Date:

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Final conclusion
From the audit work carried out I confirm that:
- the work has been performed in accordance with the audit programme;
- the work performed and the results obtained have been adequately documented;
- all necessary information has been collected for the presentation and disclosure in the financial
statements;
- sufficient and appropriate evidence has been obtained to support the audit conclusion reached;
and
- in my opinion the income statement are fairly stated/ * not fairly stated as described below.

Prepared by: Date:

Reviewed by: Date:

* Delete if not applicable

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W.P
required satisfactory Comments and
Ref
Y/N Y/N date
General
1 Agree opening balances to last year’s accounts.
2 Obtain and check, or prepare, a lead schedule for the current year’s
figures and reconcile this to the general ledger.
3 Examine any material journal entries or other adjustments made during
the course of preparing the financial statements.
4 Carry out analytical procedures such as:
(a) comparison of the current figures with those of budgets and prior
periods (e.g. monthly analysis), obtain explanations in respect of
material variations from those of expectation or last period;
(b) review and comparison of key ratios (e.g. G.P.ratio) or other
performance indicators and obtain reasons for fluctuation; and
(c) scrutinise the general ledger on those accounts with material
variances to see whether there are any unusual and abnormal items.
5 Review the planned extent of reliance on internal controls in this area
and consider whether this remains appropriate.
6 Assess whether the initial materiality and/or risk assessment should be
revised in view of the audit evidence obtained. Record details of any
necessary adjustments. Consider the impact on the remainder of the audit
work and on any work undertaken to date.
7 Review for large and/or unusual items and verify.
8 Review of appropriateness and consistency of accounting policies used
by the entity.
Income
9 Identify all material sources of income:
(a) specify how each source has been audited; and
(b) ensure recognition of income in compliance with SLFRSs
10 Where pre-numbered invoices, goods dispatched notes and credit notes
are used, check the sequence and investigate missing items and
determine the full population.

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required satisfactory W.P Ref Comments and
Y/N Y/N date
11 Where available, select a sample of copy sales invoices, and vouch to
supporting documentation.
(a) Compare data on the sales invoice to the sales day book, customer
orders, dispatch and other supporting documents; and
(b) Review the sales invoices for evidence of approval, clerical accuracy,
terms and prices in relation to pricing policies and credit limits.
12 Where available, select a sample of goods dispatched notes, including a
number of items around the year end (where required) and vouch to
supporting documentation:
(a) Ensure details are correctly reflected on the sales invoice;
(b) Agree invoices through to the sales ledger and general ledger;
(c) Ensure item are properly approved and accounted for in the correct
period; and
(d) Investigate any unusual delays between date of dispatch and the date of
invoicing.
13 Where goods dispatched notes are not used/retained, specify the audit work
(e.g. the verification of contract and delivery to the customer) to ensure that
all sales made are invoiced.
14 Test the sales day book/ledger as follows:
(a) Test the casts and crosscasts;
(b) Test posting of the totals to the general ledger;
(c) Test vouch entries in the sales day book with copies of invoices;
(d) Trace entries from the cash book to the sales ledger; and
(e) Scrutinise unusual entries.
Cut-off on sales
15 Test sales cut-off as follows:
(a) Review credit notes after the year end and consider whether these
have been accounted for in the correct period;
(b) If the company has dispatch records, examine sales and dispatch
records before and after the year end and ensure that:

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W.P
required satisfactory Comments and
Ref
Y/N Y/N date
- all goods dispatched before the year end are excluded from
inventories and included in sales and trade receivables where
appropriate;
- all goods dispatched after the year end are included in inventories
and excluded from sales and trade receivables where appropriate.
(Refer to notes from physical inventory counting.); and
(c) If the company does not have dispatch records, specify the audit
work to ensure that cut-off has been correctly applied.
Cash sales
16 Check to ensure that cash sales are banked regularly.
17 Select a sample of till rolls or sales dockets, and vouch to supporting
documentation.
(a) check the additions;
(b) check the numerical sequence and investigate any missing items;
(c) check the pricing;
(d) for till rolls, ensure that the level of “no sales” is acceptable; and
(e) check total cash sales to the cash book.
Sales returns
18 Review sales returns and, where material, select a sample.

(a) check the quantity and description on the credit note to a goods
returned note or other documentary proof of receipt of goods;
(b) ensure the details agree to the original invoice;
(c) review the credit notes and supporting data for evidence of approval,
clerical accuracy and nominal coding;
(d) compare the credit note to entries in the sales ledger;
(e) examine paid cheques if a refund was issued to the customer; and
(f) consider the effect that any normal delay between receipt of returned
goods or customers' request for credit and the recording of the credit
note may have on cut-off.

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W.P
required satisfactory Comments and
Ref
Y/N Y/N date
Government grants
19 In respect of government grants:
(a) check that, prima facie, all grants to which the client is entitled have
been claimed and recognized;
(b) confirm that there is reasonable assurance that the entity will comply
with the conditions attaching to all grants recognized; and
(c) have grants been recognized in the income statement in accordance
with SLFRSs?
Other income
20 Vouch any material other income (e.g. fair value changes, written back of
provision and gain on disposal of assets) to supporting documentation and
ensure that it is correctly described.
21 Test the receipts side of the cash book as follows:
(a) test casts and crosscasts; and
(b) test postings to the general ledger.
22 Check rental income to tenancy agreement.
23 Check reasonableness of interest income.
Expenditure
24 Check numerical sequence of good received notes and investigate
missing items.
25 Select a sample of goods received note and purchase orders for the goods
/ services received:
(a) examine for supplier's name, approval, clerical accuracy, delivery
terms and other information;
(b) check the goods received note and purchase order with the supplier
invoices, payments made and other supporting records; and
(c) trace the details of invoices for inventory items to posting in the
perpetual inventory records (if any) and purchase day book.
26 Select a sample of purchases from the purchases day book:

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W.P
required satisfactory Comments and
Ref
Y/N Y/N date
(a) review the supplier invoice and supporting data for evidence of
approval, suppliers' name, clerical accuracy, quantities and prices in
relation to the purchase order and supporting documentation,
reasonableness of the expenditure; and
(b) check the goods received note and purchase order with the supplier
invoices, payments made and other supporting records.
(c) consider whether there is adequate control over the issue of cheques.
Cut-off on purchases
27 Test cut-off on purchases as follows:
(a) If the company retains goods received records, examine the goods
received/purchased records immediately before and after the year end
and ensure that:
- all goods delivered prior to the year end are included in inventories,
purchases and trade payables where appropriate; and
- all goods delivered after the year end are excluded from
inventories, purchases and trade payables where appropriate.
(b) If the company does not have goods received records, specify below
the audit work to ensure that cut-off has been correctly applied.
Accounting estimates
28 Consider the following procedures where estimates are used by
management (e.g. in determining the value of inventories, accruals or
provisions):
(a) where not already done, obtain audit evidence about the general
reliability of the company’s estimating procedures and methods,
including relevant control activities;
(b) consider whether adjustments to any estimating formulae may be
required;
(c) consider whether differences between actual results and previous
estimates have been quantified and that, where necessary,
appropriate adjustments or disclosures made; and

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required satisfactory W.P Ref Comments and
Y/N Y/N date
(d) if expert opinion is sought, whether assessment of the independence of
the expert and basis of the underlying assumptions have been performed.
Wages and salaries
29 Reconcile a list of employees and their gross pay to the staff costs charge in
the accounts. Explain and verify any material differences.
30 Where considered necessary in view of the results of the above test:
(a) check the casts and crosscasts;
(b) check the postings to the nominal ledger;
(c) check details of the gross to net pay calculation; and
(d) ensure that the payroll is authorized by a responsible official.
31 Select a sample of employees and check to supporting documents (e.g.
employment contracts, time cards, employer's returns)
32 Enquire into unclaimed wages and verify the explanations.
33 Where payments to causal workers are significant, check the validity and
authority of such payments (e.g. approved time cards, wage rate and
overtime payments)
34 Obtain details of emoluments paid and payable, including benefits-in-kind
for directors and key management personnel.
35 Verify whether the directors' emoluments and interests in contracts are
properly stated in the financial statements by reference to:
(a) service contracts;
(b) board minutes; and
(c) articles of Association
Related party transactions
36 Have we obtained sufficient appropriate audit evidence regarding the
identification and disclosure by management of related parties in
compliance with LKAS 24 and the effect of related party transactions that
are material to the financial statements?
37 Where we do not have sufficient evidence or if there is any indication that a
material misstatement regarding related parties may have occurred then
complete the optional programme (Rop02) Related Party Transactions.

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W.P
required satisfactory Comments and
Ref
Y/N Y/N date
Other
38 Prepare analysis schedules for any expense categories where this is
required for tax or disclosure purposes not yet shown in Q section.
Specify below the accounts to be analyzed.
39 Test the payment side of the cash book:
(a) test casts and crosscasts.
(b) test postings to the general ledger.
40 For expense other than purchases, select a sample of cash paid
entries:
(a) compare the information on the cheques to entries in the cash
book and check dates, amounts, payees, signatures and
endorsements;
(b) test vouch with invoices and other supporting evidence,
checking accuracy of general ledger analysis ; and
(c) investigate cheques, especially those payable to cash, banks,
directors, employees, subsidiary and related companies, which
appear unusual.
41 Review the general ledger for unusual adjustments and verify.
Employee benefits and share-based payment
42 Confirm that an expense and corresponding liability been
recognized for all profit-sharing and bonus arrangements where a
present legal or constructive obligation exists.
43 Where post employment benefits (such as pensions) are provided
confirm that the accounting treatment is in accordance with
SLFRSs.
44 Confirm that an expense was recognized in the income statement as
part of the profit or loss for the period where the entity entered into
any share based payment transaction.
45 Ensure that the accounting treatment of any share based payment
transactions is in accordance with relevant SLFRSs; in particular:
(a) For equity-settled share-based payment transactions, has the
entity measured the goods or services received, and the
corresponding increase in equity at:

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required satisfactory W.P Ref Comments and
Y/N Y/N date
- the fair value of the goods or services received; or
- if the entity cannot estimate reliably the fair value of the goods or
services received then by the corresponding increase in equity,
indirectly, by reference to the fair value of the equity instruments
granted?
(b) For cash-settled share-based payment transactions, has the entity
measured the goods or services acquired and the liability incurred at the
fair value of the liability?
(c) For share-based payment transactions in which the terms of the
arrangement provide either the entity or the counterparty with the choice
of whether the entity settles the transaction in cash (or other assets) or by
issuing equity instruments: has the entity accounted for that transaction,
or the components of that transaction, as either:
- a cash-settled share-based payment transaction if, and to the
extent that, the entity has incurred a liability to settle in cash or other
assets; or
- as an equity-settled share-based payment transaction if, and to the
extent that, no such liability has been incurred?
Presentation and disclosure
46 Confirm that a disclosure checklist will be completed for this year. Where
that is not the case explain how the objectives relating to disclosure will be
achieved.
47 Ensure that there is sufficient appropriate evidence on the file to support all
disclosures made.
Uncorrected Misstatements
48 Identify and record all uncorrected misstatements
Conclusion
49 Consider whether there are any points which need to be included in a letter
of representation or management letter.

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SMET 18: Uncorrected Misstatement schedule Cash and Bank

Summary of Uncorrected Misstatements

Document below all the Uncorrected Misstatements identified (cash and bank balances), including
nature of misstatements, detail working paper reference and required adjustments (Journal entry) to the
financial statements.

Misstatement 1

Details of the
Misstatement

Required
Adjustments

WP Reference

Misstatement 2

Details of the
Misstatement

Required
Adjustments

WP Reference

Prepared by : Date :
(Engagement
Manager)

Reviewed by : Date :
(Engagement
Partner)

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SMET 19: Lead Schedule

Step 1 : General information

Name of the Client

Year End
Significant Account
Step 2 : Lead schedule

Draft Adjusted
Account Current Current Prior Variance Variance
GL Account no Name Year Adjustments Year Year (Rs) (%) Notes

Accounting Policy (Provide a brief description about accounting policy related to the particular balance)

Step 3 : Account details and comments on variances and ratios

Account Details

Comments on variances and ratios

Note 1:

Note 2:

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Step 4: Significant audit findings and management letter points WP Reference

Significant audit findings

Un-corrected Misstatements

Management letter points

Step 5: Overall Conclusion

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SMET 20: Management Representation Letter Template

[The following illustrative letter includes written representations that are required by SLAuSs in
effect for audits of financial statements. It is assumed in this illustration that the applicable
financial reporting framework is Sri Lanka Accounting Standards. The SMPs are advised to
modify the form and content of this letter, if required referring to SLAuS guidance,]

(Firm’s letterhead)

(To Auditor)

(Date)

This representation letter is provided in connection with your audit of the financial statements of
[Name of the Client] for the year ended [Reporting Period] for the purpose of expressing an
opinion as to whether the financial statements are presented fairly, in all material respects, (or
give a true and fair view) in accordance with Sri Lanka Accounting Standards.

We confirm that (to the best of our knowledge and belief, having made such inquiries as we
considered necessary for the purpose of appropriately informing ourselves):

Financial Statements
We have fulfilled our responsibilities, as set out in the terms of the audit engagement dated
[insert date], for the preparation of the financial statements in accordance with Sri Lanka
Accounting Standards; in Particular the financial statements are fairly presented (or give a true
and fair view) in accordance with Sri Lanka Accounting Standards.

Significant assumptions used by us in making accounting estimates, including those measured at

fair value, are reasonable.

Related party relationships and transactions have been appropriately accounted for and disclosed
in accordance with the requirements of Sri Lanka Accounting Standards.
ITING
All events subsequent to the date of the financial statements and for which Sri Lanka Accounting
Standards require adjustment or disclosure have been adjusted or disclosed.

The effects of uncorrected misstatements are immaterial, both individually and in the aggregate,
to the financial statements as a whole. [A list of the uncorrected misstatements is attached to the
representation letter]

[Any other matters that the auditor may consider appropriate]

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Information Provided

We have provided you with:

• Access to all information of which we are aware that is relevant to the preparation of the
financial statements such as records, documentation and other matters;

• Additional information that you have requested from us for the purpose of the audit; and

• Unrestricted access to persons within the entity from whom you determined it necessary
to obtain audit evidence.

All transactions have been recorded in the accounting records and are reflected in the financial
statements.

We have disclosed to you the results of our assessment of the risk that the financial statements
may be materially misstated as a result of fraud.

We have disclosed to you all information in relation to fraud or suspected fraud that we are
aware of and that affects the entity and involves:
a. Management;
b. Employees who have significant roles in internal control; or
c. Others where the fraud could have a material effect on the financial statements.

We have disclosed to you all information in relation to allegations of fraud, or suspected fraud,
affecting the entity’s financial statements communicated by employees, former employees,
analysts, regulators or others.

We have disclosed to you all known instances of non-compliance or suspected non-compliance

with laws and regulations whose effects should be considered when preparing financial
statements.

We have disclosed to you the identity of the entity’s related parties and all the related party
relationships and transactions of which we are aware.

[Any other matters that the auditor may consider necessary]

[Name of the key Client personal, Designation and Date]

Attachment: Summary of uncorrected misstatements (signed by key client personnel)

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SMET 21: Other Audit Procedure Template

Consider performing other audit procedures as given below and document findings.

Other Audit Procedures WP Work

Reference Performed by
/Reviewed by
1. Audit Client and engagement acceptance/continuance procedures
Confirm that appropriate audit client and engagement continuance
procedures (or in the case of an initial audit, audit client acceptance
procedures) were performed prior to be beginning the audit work (or
accepting the audit client).
2. Independence
Confirm that required independence procedures have been completed to
determine that members of the engagement team comply with all personal
independence requirements with respect to this audit client and its affiliates.
3. Terms of our engagement
Confirm that an engagement letter have been sent covering this engagement,
in accordance with SLAuSs. If the engagement letter was prepared in a prior
year, confirm that the engagement letter is still applicable and no need of
updating.
4. Minutes and contracts
1. Obtain information regarding meetings of the board of directors,
shareholders, and important committees (e.g., audit, executive, and
other committees) up to the date of auditors’ report.
2. Read minutes. Obtain copies of the signed minutes or prepare
appropriate excerpts. (If the copies are not signed, compare them with
the original signed minutes.)
3. If minutes have not been prepared for recent meetings, perform
alternative procedures to determine the matters covered at these
meetings.
4. Determine the completeness of the minutes of the meetings of
shareholders, those charged with governance and committees in which
auditor is interested.
5. Obtain and read significant contracts, agreements, and similar
documents and consider their accounting or auditing implications.
Cross-reference significant accounting and auditing issues affecting the
financial statements to the appropriate work papers.
5. Litigation and claims
Perform procedures in order to become aware of any litigation and claims
involving the entity which may have a material effect on the financial
statements:
• Inquire of management, including in-house legal counsel, about
matters such as the entity’s policies and procedures for identifying,
evaluating and accounting for litigation and claims.

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Other Audit Procedures WP Work Performed

Reference by /Reviewed
by
• Read minutes of meetings of those charged with governance.
• Read correspondence between the entity and its external legal
counsel for indications of actual or threatened litigation and claims.
• Review legal expense accounts for unusual or unexpected amounts
and for the use of legal firms or in-house counsels for which
separate legal inquiries may be warranted.
• Obtain and review a list of known actual or possible litigation and
claims, including an assessment of the outcome and its estimated
financial effect, from management and in-house legal counsel.
• Establish whether auditor is aware of any potential litigations or
claims as a result of obtaining an understanding of the entity and its
environment or from our other planning procedures.
• Obtain written representations from management and, when
appropriate, those charged with governance, that all known, actual
or possible litigation and claims, whose effects should be
considered when preparing the financial statements, have been
disclosed to us and accounted for and disclosed in accordance with
the applicable financial reporting framework.
6. Going Concern
• Consider the entity’s ability to continue as a going concern.
• If events or conditions have been identified that may cast
significant doubt on the entity’s ability to continue as going
concern, perform additional procedures (including obtaining going
concern assessment done by the management).
7. Considerations of Laws and regulations
• Obtain and document sufficient appropriate audit evidence
regarding the entity’s compliance with relevant laws and
regulations that have a direct effect on the determination of
material amounts and disclosures in the financial statements.
• Plan and perform specific procedures to help identify instances of
non-compliance with those laws and regulations that may have a
material effect on the financial statements.
8. Related Parties
Perform following audit procedures (or provide reference to other
related working papers)for related parties
• Identify related party relationships and transactions
• Understand related party transactions
• Evaluate completeness of related party transactions
• Identify significant audit issues and auditor response
• Document findings
9. Management Representation (Refer SMET 20- Management
Representation Letter Template)
Obtain representation from management
Subsequent Events Review

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Review by the Engagement Partner

I have reviewed this Other Audit Procedures Template and the results of the procedures for this
engagement and am satisfied that all applicable other audit procedures have been completed, the
conclusions are reasonable and consistent with professional standards, and the financial
statements and/or the auditor’s report properly reflect the issues addressed.

Signature: Date:

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SMET 22: Significant Audit Findings Template

Significant Accounting and Auditing Issues and their Resolution:

Indicate below the significant accounting and auditing issues addressed during the audit. Attach
separate memorandum(s) as required to fully explain a particular issue and its resolution
(provide working paper reference for detail explanation).
Issue 1

Resolution

Issue 2

Resolution

Issue 3

Resolution

Issue 4

Resolution

Issue 5

Resolution

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Overall Analysis of Analysis of Financial and Non-Financial Information

Based on the analysis done in SMET 04—Analysis of financial and non-financial information,
provide a summary of key comments.

Evaluation of Misstatements
Document below a summary of identified misstatements and conclude on the impact of total
uncorrected misstatements. (The auditor should ask management to correct all the
misstatements. Uncorrected misstatements should be communicated to TCWG. If TCWG is in the
opinion that the aggregation of uncorrected misstatements is not material to the financial
statement, a management representation should be obtained in the “Management Representation
Letter”. Consider need for modification of audit report if uncorrected misstatements are
material).

Performance Materiality:

Description Required Working Amount of Over/Under Statement

Adjustment (Journal Paper
Assets Liability Pre-Tax Equity Corrected
Entry) Ref.
Income Yes/No

Total of identified misstatements during

the year
Misstatements corrected by management

Total uncorrected misstatements

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Overall Conclusion

Opinion and Sign-off

(If there is a modification in the audit report, modify the following statement
appropriately)
It is our opinion that the scope of the audit was adequate and the financial statements of
[Name of the client] for the year ended are presented fairly, in all material respects, in
conformity with [Reporting framework], applied on a consistent basis.

Prepared by :

Team Member 1: Date :

Team Member 2: Date :

Engagement Manager: Date :

Reviewed by : Date :
(Engagement Partner)

Reviewed by : Date :
(Engagement Quality
Reviewer)

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SMET 24: Management Letter Comments Template

Company Name:

Reporting Period:

Prepared by:

Reviewed by:

Description of problem (include specific examples)

How was problem noted (reference to working papers, if applicable)

Suggestion for improvement

Benefits client should realize by adopting our suggestion

Comment discussed with

Client’s comments

Comment included in letter Yes No

If not included, explain:

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Supplement 1- Minimum Sample Size (Test of Controls)

Sample Size depends on following Factors.
1. Potential for Risk of material misstatement
2. Population Size
3. Reliance on Overall Internal Controls

Sample Size Tables

Tables are not available for every size population
1. Population of controls that operated approximately 500 times*
Not rely on Overall Risk of Material Misstatement (RMM)
Internal Controls High Medium Low
45 25 14
If there is no controls or if If there is no controls or if If there is no controls
Sample Size
controls are not effective controls are not effective or if controls are not
effective

Risk of Material Misstatement (RMM)

Rely on High Medium Low Re-performance of Internal
Overall Audit testing (additional
Internal items for controls where
Controls there is a High or Medium
potential for control failure)
If there are If there are If there are controls,
controls, but controls, but but provide moderate
provide moderate provide moderate satisfaction.
Some satisfaction. satisfaction. 2
25 plus 14 plus 14 inclusive of
re-performance re-performance re-performance items
items items
If there are If there are If there are controls,
controls, but controls, but but provide moderate
provide moderate provide satisfaction.
satisfaction. moderate
satisfaction.
14 plus re- 14 inclusive of re-
performance 14 plus re- performance items
Maximum items performance OR 3
items (if client does at least
20 and satisfies
competence and
objectivity criteria
more than moderately)
4 re-performance items
only

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2. Population of controls that operated approximately 350 times*

Not rely on Overall Risk of Material Misstatement (RMM)

Internal Controls High Medium Low
25 20 14
If there is no controls If there is no If there is no controls or
Sample Size or if controls are not controls or if if controls are not
effective controls are not effective
effective

Risk of Material Misstatement (RMM)

High Medium Low Re-performance of
Rely on Internal Audit testing
Overall (additional items for
Internal controls where there
Controls is a High or Medium
potential for control
failure)
If there are If there are controls, If there are
controls, but but provide more controls, but
provide more than than a moderate provide more than
a moderate satisfaction. a moderate
Some satisfaction. satisfaction. 1

20 plus re- 14 plus re- 14 plus re-

performance items performance items performance
items
If there are If there are controls, If there are
controls, but but provide more controls, but
provide more than than a moderate provide more than
a moderate satisfaction. a moderate
satisfaction. satisfaction.

14 plus re- 14 plus re- 14 inclusive of re-

performance items performance items performance
items
Maximum OR 2
(if client does at
least 20 and
satisfies
competence and
objectivity
criteria more than
moderately)
4 re-performance
items only

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3. Population of controls that operated approximately 50 times*

Not rely on Overall Risk of Material Misstatement (RMM)

Internal Controls High Low
8 5
Sample Size If there is no controls or if controls If there is no controls or if controls
are not effective are not effective

Risk of Material Misstatement (RMM)

High Low Re-performance of
Internal Audit testing
Rely on Overall (additional items for
Internal Controls controls where there
is a High or Medium
potential for control
failure)
If there are controls, but If there are controls, but
provide more than a provide more than a
moderate satisfaction moderate satisfaction
Maximum 2
5 plus re-performance items 5 inclusive of re-
performance items

Note – because the above sample size ranges are small, the above tables do not cover where there is
a medium potential for control failure and some reliance on Overall Internal Controls. We may
judgmentally select a sample size between the minimum and maximum if circumstances indicate
that the medium potential and some reliance categories are appropriate for a control operating
approximately 50 times.

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4. Population of controls that operated approximately 12 times*

Risk of Material Misstatement (RMM) Re -performance of

High Low Internal Audit tests
(additional items for
controls where there
is a high potential
for control failure)
Not rely on 4 2
Overall If there is no controls or if If there is no controls or None
Internal controls are not effective if controls are not
Controls effective
If there are controls, but If there are controls, but
Rely on provide more than a moderate provide more than a
1
Overall satisfaction moderate satisfaction
Internal
Controls 2 plus re-performance items 2 inclusive of re-
performance item

Note – because the above sample size ranges are small, the above tables do not cover where there
is a medium potential for control failure and moderate reliance on Overall Internal Controls. We
may judgmentally select a sample size between the minimum and maximum if circumstances
indicate that the medium potential and some reliance categories are appropriate for a control
operating approximately 12 times.

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5. Population of controls that operated approximately 4 times*

Risk of Material Misstatement (RMM) Re -performance of

High Low Internal Audit tests
(additional items for
controls where there is a
high potential for control
failure)
Not rely on 2 1
Overall If there is no controls or if If there is no controls or if
Internal controls are not effective controls are not effective None
Controls
Rely on If there are controls, but If there are controls, but
Overall provide more than a provide more than a
1
Internal moderate satisfaction moderate satisfaction
Controls 1 1

Note – because the above sample size ranges are small, the above tables do not cover where
there is a medium potential for control failure and moderate reliance on Overall Internal
Controls. We may judgmentally select a sample size between the minimum and maximum if
circumstances indicate that the medium potential and some reliance categories are appropriate
for a control operating approximately 4 times.

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