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CA Ravi Taori
QNO— Examination In-depth of Payment to Creditor Old Course – (N23R)
AIFS.29.50 Bhaskar CNO - Unique
M/s MP & Co, Chartered Accountants, have been appointed as auditors of LMP Private Limited. The
partner of the firm asked the Audit assistant to carry out the 'examination-in-depth' of the payment
made to a creditor. Advise him about the documents to be verified.
Answer Examination – in depth of the payment made to creditor: The Audit Assistant of M/s MP & Co., should
verify the following documents of LMP Private Limited in case of payment to a creditor is to be verified “in
depth”:
(i) The invoice and statement of account received from the supplier.
(ii) The entry in the inventory record showing that the goods were received.
(iii) The Goods Received Note and Inspection Certificate showing that the goods on receipt were
verified and inspected.
(iv) The copy of the original order and authority showing that the goods in fact were ordered by
an authority which was competent to do so.

QNO— Audit of Provisions Old Course – (M23E)
AIFS.29.80 Bhaskar CNO - AIFS-P1.140
CA Q, the auditor of XYZ Ltd, while conducting audit observes that the company has made various
provisions in the books of account. What are the audit procedures that CA Q will follow to verify the
existence, completeness, and valuation of the provisions made?
Answer Audit Procedures that CA Q will follow to verify the existence, completeness, and valuation of provisions
made are given hereunder:

➢ Existence
1. Obtain a list of all provisions and compare them with balances in the ledger.

2. Inspect the underlying agreements like agreements with customers to assess warranty
commitments, any legal and other claims on the entity i.e. litigations.

➢ Valuation
3. Wherever required, obtain the expert’s report, calculation and underlying working for the
provision amount. For example - for warranty involving complex calculations, some entities
get that valued through an actuary.

In such a case, the auditor may request the management to share the actuarial valuation
report and in case of any matter under legal dispute, the auditor should request for
assessment made by a legal expert in relation to likelihood of a liability devolving on the entity
i.e. whether probable or possible or remote as defined above. The auditor should then verify
the underlying assumptions used by the expert with the data shared by the management.

➢ Completeness
4. Obtain the underlying working and the basis for each of the provisions made from the
management and verify whether the same is complete and accurate.

5. The auditor shall obtain a written representation from the management that it has made all
the provisions which were required to be made as per the recognized accounting principles.

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