KPMG Audit I- Exercising Professional Judgment-PM/01: Common Audit Scenarios

PM/01: Common Audit Scenarios

The following are some common audit scenarios requiring judgment. Apply the KPMG Professional
Judgment Process to your assigned scenario.

Scenario #1

You receive a bank confirmation that includes details of debt covenant requirements on your clients
significant loan balance. This debt covenant has not been communicated to the audit engagement team
by the client.

Scenario #2

Your client mentions that the sole Accounts Payable Clerk is leaving on maternity leave next week;
however they have yet to find a replacement staff member.

Scenario #3

The client advises you that they closed a bank account during the year. However the bank confirmation
received from the bank indicates that the account remains open and has a current balance.

Scenario #4

The Financial Controller at your client mentions that they have just been on vacation for 3 months and no
bank reconciliations were completed during this time as they are the only staff member with sufficient
knowledge to prepare the reconciliation. The Financial Controller states that they will need to put in a lot
of overtime to catch up.

Scenario #5

You ask the Human Resources Manager at your client the total headcount of the local office and they
respond with a number (65) without referring to any supporting documentation.

Scenario #6

During your audit work over accounts payable at your client that manufactures cheese, you sight an
invoice relating to the installation of a swimming pool in the same suburb where the CEO lives.

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