Topic 6- Substantive Testing

Question 1

What key tests need to be performed on non current assets?

Answer 1

Ownership
Existence
Valuation
Completeness
Classification
Presentation

Question 2

How do you review ownership?

Answer 2

By checking invoices and registration documents

Question 3

How do you check for existence?

Answer 3

Physically verifying it

Question 4

How do you verify valuation?

Answer 4

Re-calculating , Analytical procedures or by external valuation

Question 5

How do you test for completeness?

Answer 5

By reviewing and matching costs with receipts and agreeing asset list to accounts

Question 6

How do you verify classification?

Answer 6

Checking everything is in the correct class

Question 7

What four pieces of information can be used when testing intangible assets?

Answer 7

Accounting standards
Purchasing invoices
Client calculations
Specialist valuation

Question 8

What is perpetual inventory counting?

Answer 8

Continuous inventory counting and may result in there not needing an inventory count at year end. It is more reliable.

Question 9

What sources of information can be used to check the receivables balance?

Answer 9

Receivables ledger information
Confirmations from customers
cash payment received after the year end

Question 10

What sources of information can be used to verify the amount of cash balances held on hand and at bank?

Answer 10

Confirmations
Bank statements
Bank reconciliations

Question 11

What sources of information can be used to gather evidence on payables?

Answer 11

Payables ledger records and supplier statements
Confirmation from suppliers
Payment made post year-end