(b) Explain the principal audit procedures to be performed during the final audit in respect of the estimated
warranty provision in the balance sheet of Island Co as at 30 November 2007. (5 marks)
正确答案：
(b)ISA540AuditofAccountingEstimatesrequiresthatauditorsshouldobtainsufficientauditevidenceastowhetheran
accountingestimatesuchasawarrantyprovisionisreasonablegiventheentity’scircumstancesandthatdisclosureis
appropriateOneoracombinationofthefollowingapproachesshouldbeused:
Reviewandtesttheprocessusedbymanagementtodeveloptheestimate
–ReviewcontractsorordersforthetermsofthewarrantytogainanunderstandingoftheobligationofIslandCo
–Reviewcorrespondencewithcustomersduringtheyeartogainanunderstandingofclaimsalreadyinprogressatthe
yearend
–Performanalyticalprocedurestocomparethelevelofwarrantyprovisionyearonyearandcompareactualtobudgeted
provisionsIfpossibledisaggregatethedataforexamplecompareprovisionforspecifictypesofmachineryorcustomer
bycustomer
–Re-calculatethewarrantyprovision
–AgreethepercentageappliedinthecalculationtothestatedaccountingpolicyofIslandCo
–Reviewboardminutesfordiscussionofon-goingwarrantyclaimsandforapprovaloftheamountprovided
–Usemanagementaccountstoascertainnormallevelofwarrantyrectificationcostsduringtheyear
–DiscusswithKateShannontheassumptionssheusedtodeterminethepercentageusedinhercalculations
–Considerwhetherassumptionsusedareconsistentwiththeauditors’understandingofthebusiness
–Compareprioryearprovisionwithactualexpenditureonwarrantyclaimsintheaccountingperiod
–ComparethecurrentyearprovisionwithprioryearanddiscussanyfluctuationwithKateShannon
Reviewsubsequenteventswhichconfirmtheestimatemade
–ReviewanyworkcarriedoutpostyearendonspecificfaultsthathavebeenprovidedforAgreethatallcostsareincluded
intheyearendprovision
–Agreecashexpendedonrectificationworkinthepostbalancesheetperiodtothecashbook
–Agreecashexpendedonrectificationworkpostyearendtosuppliers’invoicesortointernalcostledgersifworkcarried
outbyemployeesofIslandCo
–Readcustomercorrespondencereceivedpostyearendforanyclaimsreceivedsincetheyearend
