(b)

(i) Audit procedures on the valuation of work in progress
1 mark for each well explained audit procedure:
– Obtain a schedule itemising the jobs included in work in progress at the year end, cast it and
agree the total to the general ledger and draft financial statements
– Agree a sample of items from the schedule to the inventory count records
– For a sample of jobs included on the schedule:
o Agree costs to supporting documentation such as supplier’s invoice and payroll records
o For any overheads absorbed into the work in progress valuation, review the basis of the
absorption and assess its reasonableness
o Assess how the degree of completion of the job has been determined at the year end and
agree the stage of completion of the job to records taken at the inventory count
o Agree the details of the job specification to customer order and
o Confirm that net realisable value is greater than cost by agreeing the contract price and
cash received from the customer post year end
– To assess the completeness of work in progress, select a sample of customer orders and trace
through to the list of jobs included in work in progress
Maximum marks 4

(ii) Audit procedures in respect of the government grant
1 mark for each well explained audit procedure:
– Obtain the documentation relating to the grant to confirm the amount, the date the cash was
received, and the terms on which the grant was awarded
– Review the documentation for any conditions attached to the grant, for example, is there a
requirement that a certain number of people are employed at the manufacturing plant?
– Discuss with management the method of recognition of the amount received, in particular how
much of the grant has been recognised in profit and the treatment of the amount deferred in the
statement of financial position
– For the part of the grant relating to continued operation of the manufacturing plant, determine
the basis on which this is being released into profit, assess its reasonableness and recalculate
to confirm accuracy of management’s calculations
– Review forecasts and budgets in relation to the manufacturing plant to assess the likelihood of
its continued operations until 2020
– Using the draft financial statements, confirm the accounting treatment outlined by discussion
with management has been applied and recalculate the amounts recognised
– Confirm the cash received to bank statement and cash book
Maximum marks 4
Professional marks for headings, introduction, conclusion and quality of explanations provided 4