kajian ie - wa bank

P 4202 AUDITING

© Hak Cipta Sant Sahabat dan Kawan-Kawan. Dibenar untuk tujuan pembelajaran sahaja

IE-WA BANK

Background

IE-WA BANK (IEW) has the headquarters are in Damansara, Selangor and it has banking

operations in 35 communities in Negeri Sembilan. It loan portfolio consist primary of agricultural

loans, commercial loan, real estate loans to individual. Credit granting authority is headquarters

an curtained loan officer have decision authority for small loans in their local area.

Because of IEW’s strong control over bank loans, the team place high reliance on controls for

example the control risk is assessed as low. Additional detail testing will only be perform if

analytical procedure suggest interest income is materially misstated. The 2008 report interest

income is RM 35,337,204 and the net income is RM 12,484,000. Misstatement if RM 525,000 is

considered material.

To comparing the current year interest income and previous year interest income:-

Average loan volume x Weighted average interest rate

P 4202 AUDITING


Part A

[1] As part of the year - end audit and using the analytical – procedure approach similar to last

year’s audit (average loan volume multiplied by weighted – average interest rate ), determine if

IEW Bank’s interest income from loans reported at December 31, 2008 appears fairly stated.

Do the result of the analytical procedure indicate that you accept 2008 interest income as

reported?

IEW’s Loan Interest Analytical Procedure Updated for 2008

Agregate Loan Volume (or balance) as of Dec.31, 2007 RM388,110,000

Agregate Loan Volume as a December 31, 2008 RM383,860,000

Average Loan Volume (or volume) for 2008 RM385,985,000

Multiplied by Weighted Average Annual Interest Rate (2008) x 9.115%

Computed 2008 Loan Interest Income RM35,183,000

2008 Loan Interest Income per IEW RM53,337,000

Difference RM 154,000

Yes, because the difference value is not less then RM 525,000. So, that is not material.

P 4202 AUDITING


[2] Based on the result of the analytical procedure, how likely is it that 2008 interest income is

materially misstated?

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Definitely not Definitely

Misstated Misstated

154,000 X 100 = 29.33%

525,000

[3] Please indicate on the scale below your assessment of the strength (quality and sufficiency)

of evidence by the interest income analytical procedure:

1 2 3 4 5 6 7 Extremely Weak/ Extremely Strong/ Useless Evidence Removes all doubt

(525,000 - 154,000) X 7 = 4.95

525,000

P 4202 AUDITING


Part B

[1] Given the additional information provided in Part B ( i.e. quarterly information by loan type) ,

please determine if IEW Bank’s interest income from loans reported at December 31, 2008

appears fairly stated. Can you accept 2008 interest income as reported?

For the Year 2008 Commercial and Agricultural Loans

Real Estate Loans

First Quarter Average Loan Volume X Weight Average Interest Rate Expected Interest Income, First Quarter

RM 267, 003,000

2.15% 5,741,000

RM 99,998,000 2.40%

2,400,000

Second Quarter

Average Loan Volume X Weight Average Interest Rate Expected Interest Income, Second Quarter

RM 263,868,000

2.08% 5,488,000

RM101,200

2.35% 2,378,000

Third Quarter Average Loan Volume X Weight Average Interest Rate Expected Interest Income, Third Quarter

RM 264, 400,000

2.13% 5,632,000

RM 95, 608

2.35% 2,247,000

Fourth Quarter Average Loan Volume X Weight Average Interest Rate Expected Interest Income, Fourth Quarter

RM 266, 510,000

2.17% 5,783,000

RM 96,200

2.43% 2,338,000

Annual Expected Interest income by Loan Type

Based on Quarterly Data RM 22,644,000 RM9,363,000 RM2,515,000

Computed Total Interest Income per Audit RM34,522,000

(RM22,644,000 + RM9,363,000 + RM2,515,000)

2008 Loan Interest Income per IEW RM 35,337,000

Difference RM815,000

No, because the difference value more then RM525,000. So, that is material.

P 4202 AUDITING


[2]Based on the result of the analytical procedure preformed in Part B, how likely do you think it

is that 2008 interest income is materially misstated?

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Definitely not Definitely

Misstated Misstated

815,000 X 100 = 155%

525,000

[3] Please indicate on the scale below your assessment of the strength (quality and sufficiency)

of evidence provided by the interest income analytical procedure:

1 2 3 4 5 6 7 Extremely Weak/ Extremely Strong/ Useless Evidence Removes all Doubt

(525,000 + 815,000) X 7 = -3.87

525,000

P 4202 AUDITING


[4]Now reevaluate the first analytical procedure you performed (i.e. based only on average

aggregate loan and interest averages). Using hindsight, please indicate on the scale below

your assessment of the strength (quality and sufficiency) of evidence provided by that high –

level interest income analytical procedure:

1 2 3 4 5 6 6.46 7

Extremely Weak/ Extremely Strong/ Useless Evidence Removes all Doubt

154,000 + 810,000

X 7 = 6.46 2

525,000

Conclusion :

IEW’s Loan Interest Analytical Procedure Updated for 2008, in Part A is not material

because the difference value is less then RM525, 000. And Part B is material because

the difference value is more then RM525,000.

kajian ie - wa bank

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