Skip to content

ACCA Applied Skills · Audit and Assurance

The Audit of Specific Items for ACCA Audit and Assurance

The audit of specific items means planning and performing audit procedures on one financial statement area, such as inventory or receivables. You link each area to its assertions and risks, then choose procedures that gather sufficient appropriate evidence. In the exam, you must tailor procedures to the scenario, not list generic ones.

What this chapter covers

This chapter applies audit theory to individual balances and classes of transactions. You take one area at a time: inventory, receivables, payables, bank and cash, non-current assets, payroll, and provisions and contingencies. For each, you ask what could be misstated, which assertion is at risk, and which procedure would give evidence on it.

The chapter sits at the point where earlier topics come together. Risk assessment tells you where the problems are. Audit evidence tells you what types of procedure exist: inspection, observation, external confirmation, recalculation, reperformance, analytical procedures and enquiry. Internal controls tell you what to test. This chapter turns all of that into specific work, which is why it feeds directly into the later work on completion, reporting and review of evidence.

The skill is the same in every area. Read the facts, spot the risk, name the assertion, and write a procedure that is specific, doable and clearly linked to the risk. Once you can do this for inventory, the other areas follow the same pattern with different details.

Questions on specific items turn up in both the objective test cases and the constructed response section. In objective questions you must pick the right procedure or the right assertion, with no partial credit. In written questions you are asked to list audit procedures for a named balance, and you earn marks only for procedures that fit the scenario and are clearly described. Because the method repeats across every area, time spent here pays off in many questions, including those that mix in risk, controls and evidence.

The audit of specific items: topics in the order to study them

  1. 1Audit of Inventory and Inventory CountingIt is the fullest example of the method, covering attendance at a count, cut-off, valuation and existence, so everything after it is easier.
  2. 2Audit of Receivables and Receivables ConfirmationIt adds external confirmation and the handling of non-replies, and introduces valuation through allowances and irrecoverable debts.
  3. 3Audit of Payables and Completeness of LiabilitiesIt mirrors receivables but flips the main risk to understatement, so completeness becomes the key assertion.
  4. 4Audit of Bank and CashIt is short and builds on confirmation, using bank confirmation letters, reconciliations and cash counts.
  5. 5Audit of Non-current AssetsIt brings in additions, disposals, depreciation and impairment, and it draws on your financial reporting knowledge.
  6. 6Audit of PayrollIt is mainly about controls and analytical procedures, and it covers risks such as ghost employees and incorrect deductions.
  7. 7Audit of Provisions, Contingencies and Other ItemsIt comes last because it needs judgement, IAS 37 recognition rules and written representations when evidence is limited.

How to prepare The audit of specific items

Prepare this chapter by building one repeatable routine and then practising it on every area, rather than memorising long lists.

  1. For each area, write down the main risks and the assertions they affect, such as existence, completeness, rights and obligations, valuation and cut-off.
  2. For each risk, pair it with one or two procedures and note the type of evidence each gives, for example inspection, confirmation or recalculation.
  3. Practise tailoring: take a short scenario and rewrite a generic procedure so it uses the facts given, such as the location, the system or the amount.
  4. Learn the direction of testing. Existence is tested from the records to the asset. Completeness is tested from the asset or source back to the records.
  5. Revise the related financial reporting rules briefly, such as inventory at the lower of cost and net realisable value, depreciation and IAS 37, so you can judge valuation points.
  6. Answer objective test cases under time pressure, then write full procedure lists for two or three areas and check each point links to a risk.
  7. Finish by explaining out loud what you would do if evidence is missing or a figure looks wrong, including further procedures and communication.

Common mistakes in The audit of specific items

  • Writing generic procedures such as 'check the balance' or 'review the records'

    Fix: State who does what, to which document or item, and for which risk. Use facts from the scenario in each procedure.

  • Testing in the wrong direction

    Fix: Before writing a procedure, decide which assertion it tests. Records to asset for existence, asset or outside source to records for completeness.

  • Confusing audit procedures with management's controls

    Fix: Procedures are what the auditor does. Controls are what the company does. Ask who performs the action.

  • Ignoring the valuation and cut-off risks

    Fix: Run through all assertions for each area. Use post year-end events to test valuation and cut-off.

  • Stopping at a procedure when the question asks about a problem or missing evidence

    Fix: When a difference, non-reply or limitation appears, explain the follow-up, the possible misstatement and the effect on the audit report.

  • Choosing an objective test answer that sounds plausible but tests the wrong assertion

    Fix: Identify the assertion in the question first, then pick the option that gives evidence on it.

Last-day revision: The audit of specific items

  • Match every procedure to a risk and an assertion. A procedure with no link earns little.
  • Existence: test from the records to the physical item. Completeness: test from the physical item or outside source to the records.
  • Inventory count attendance: observe the count, test count sheets both ways, check cut-off and note damaged or slow-moving items.
  • Inventory valuation: check cost to invoices and compare with net realisable value using post year-end sales.
  • Receivables: external confirmation gives strong evidence on existence, but non-replies need alternative procedures such as checking later cash receipts.
  • Valuation of receivables: review ageing, post year-end receipts and the basis of the allowance.
  • Payables: the main risk is understatement, so test supplier statements, unmatched goods received and post year-end payments.
  • Bank: obtain a confirmation directly from the bank and review the bank reconciliation for old or unusual items.
  • Non-current assets: test additions to invoices, disposals to proceeds, and depreciation by recalculation and a reasonableness check.
  • Payroll: test for ghost employees, unauthorised changes and wrong deductions, and use analytical procedures on monthly totals.
  • Provisions: check the IAS 37 conditions, review post year-end events and legal letters, and obtain written representations.
  • Be ready to say what you would do if evidence is not obtained, such as extending testing or considering the effect on the audit opinion.

The audit of specific items in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

The audit of specific items: frequently asked questions

What does the audit of specific items cover in ACCA Audit and Assurance?

It covers audit work on individual areas such as inventory, receivables, payables, bank and cash, non-current assets, payroll, and provisions and contingencies. For each area you identify risks and assertions and select suitable procedures.

How do I answer a question asking for audit procedures?

Pick the risk in the scenario, then write each procedure as a clear action with the item, the document or the person involved. Make each point separate and tied to a risk. Avoid vague wording.

Do I need to learn the accounting rules for this chapter?

Yes, at a basic level. Knowing the IFRS treatment of inventory, non-current assets and provisions helps you judge whether a balance is correctly valued or recognised. You do not need the detail of a financial reporting paper.

Is this chapter tested in objective questions or written questions?

Both. Objective test questions check whether you can match procedures to assertions and risks. Constructed response questions ask you to write procedures or explain how you would respond to a problem.

Which area should I study first?

Start with inventory and inventory counting. It uses the full method and shows how procedures link to assertions, which makes the other areas quicker to learn.