Acca aaa s21 Notes

September 2021 to June 2022 exams
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4. Investigation procedures
Investigation procedures depend on the specifics of the engagement. In the AAA exam, the scenario 
will give you pointers that you need to pick up on to suggest 
appropriate
procedures. The following 
are some examples to give you ideas only – do not learn them.
4.1. Insurance claim
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Review a copy of any police report filed for details recorded soon after the loss.
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Review the insurance policy to determine ‘coverage’ (what is insured, exclusion, etc).
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Obtain evidence to quantify the loss. For example, cash/inventory records and details of sales/
purchases reconciled to cash/inventory held. The amount of cash/inventory stolen may be only 
one of the reconciling items, so the accounting system and records will need to be tested for 
errors in the data.
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Watch CCTV coverage (eg of a theft in progress or a fire in the warehouse).
4.2. Actual or suspected fraud investigation
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Audit tests on all items (or above a specific amount) in ‘suspect’ areas. For example, in a 
‘teeming and lading’ fraud, this could include external confirmation of receivables balances.
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If original documents have been destroyed, obtaining copies (eg through external confirmation 
of suppliers).
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Perform substantive analytical procedures (eg comparing profit margins over the period the 
fraud may have taken place with the before and after margins).
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Test relevant internal controls to understand the weaknesses that did not prevent or detect the 
fraud.