Chapter 13: Substantive procedures: key financial statement figures Flashcards
What are the substantive procedures when attesting about classes of transactions and events under audit for Fstat assertions?
- Occurrence: trst recorded which occured
- Completeness: trst should record are recorded
- Accuracy: recorded appropriate
- Cut-off: recorded correct period
What are the substantive procedures when attesting about account balance at period end for Fstat assertions?
- Existence: assets, liabilities and equity interest
- Rights and obligations: entity owns assets and liabilities as obligations
- Completeness: assets, liabilities & interest shoild recorded are recorded
- Accuracy, valuation: assets, liabilities & interest included in FStat
What type of audit procedures are for each of the following FStat assertion in NCA?:
a) existence
b) rights and obligatioms
c) completeness
d) valuation
a) physical verify assets from NCA list
b) inspect e.g. title deeds for property, car reg doc, share certificates, Purchase invoice
C) trace sample of assets from NCA list
d) check purchase invoice for cost, check report for reval; self constructed assets e.g labour cost; recalc Depr. charge
Why is there importance of auditing the inventory?
- some business material high
- valuation subj. (lower of cost and NRV= net realisation value/selling price)
- affects both P&L and BS
Inventory= QtyxValue
Which two points does the ISA 501 highlight about inventory count?
- evidence of quantity
- evidence over valuation
What is paid attention to before the inventory count?
- location and instructions
- if expert help needed
- system of control & internal audit arrgmt
What is paid attention to during the inventory count?
- observe counts for compliance
- cut off arrgmt
- process to keep 3rd party away from clients stock
- two way test counts
What is paid attention to after the inventory count?
- check sample selected for test counting for correct Qty
What are the audit procedures for the following Fstat assertions for inventory?
a) existence
b) rights and obligations
c) completeness
d) valuation
a) test a counted sample against whats in warehouse
b) confirm from third party about stock
c) test sample of item and agree to clients count
d) agree cost to purchase inv.; if inhouse stock (agree material cost and labour cost); evidence of NRV (check post year-end sales); check for dmg inventory
What are the audit procedures for the following Fstat assertions for receivables?
a) existence & right and obligations
b) valuations
a) obtain confirm of rec. balances from customer
b) select from rec. ledger check post year-end bank stmt of cash recvd; check allowance for doubtful debts
How does the customer confirmation work for receivables under ISA 505?
1) Audit prepares confirmation requests
2) client send request to customer
3) customer send replies direct to auditor
What types of customer confirmation exist for receivables in the FStat?
- positive (asking for confirm)
- negative (if written as if threatening i.e if you disagree)
When should you use the negative statement for receivables for FStat?
- risk of misstmt is low
- control are operating effective
- large small balances involved
- if customer not disregard the request
What are the audit procedures for the following Fstat assertions for bank and cash?
a) existence
b) right and obligations
c) valuations
a) recon to post year end bank statement
b) confirm directly with bank
c) count material client cash; confirm balance with bank
How does the bank confirmation work for Bank and cash check?
1) Audit prepares confirm request
2) client signs and sends to bank
3) bank sends confirm direct to auditor
