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Audit procedure 2 - notes

notes
Course

Auditing (ACG 4651)

6 Documents
Students shared 6 documents in this course
Academic year: 2023/2024
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University of West Florida

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Audit procedure Example Inspection of records or documents

Inspect a sample of purchase orders and trace the PO to receiving report, vendor invoice, purchase journal, and A/P general ledger account

Inspect a sample of accounts from the subsidiary A/ p ledger. Vouch those balances by inspecting supporting purchase order and receiving report

Select a sample of cash disbursements from the first 10 days of the subsequent period and if the disbursement was related to a purchased item that was received in the current year, trace the amount to the A/P general ledger at year end to be sure that the payable was properly booked in the current period.

Completeness of purchases and accounts payable

Existence of purchases and accounts payable.

Completeness of purchases and accounts payable

Inspection of tangible assets—Physically examining an asset

If the purchase was for a fixed asset, then the auditor could inspect the physical asset purchased.

However, for purchases of inventory, this is often impossible, as the purchased inventory my have been sold, or the purchased inventory may be a fungible asset for which specific identification is not possible.

This is a substantive test of the existence assertion.

Inquiry—Seeking verbal or written information of knowledgeable persons within the organization;

Inquiry of purchasing agent regarding policies for obtaining competitive bids for large purchases.

Inquire of management regarding separation of receipt of goods from authorization to purchase and from recordkeeping for the purchase

This is a risk assessment procedure that helps inform the auditor regarding the planning of substantive procedures to support the fair valuation of purchases (bids assure acquisition and lowest possible price)

This is a risk assessment procedure that helps inform the auditor regarding the planning of substantive procedures to support the existence and completeness of purchases and payables.

External confirmation— Obtaining a written response about a particular item from a third party (e., debtor, creditor)

Confirm accounts payable by requesting direct communication between the vendor and the auditor

This is a substantive test of the existence of A/P.

If the auditor confirms zero balance payables, this also provides limited evidence regarding completeness. For example, if the book balance is zero but the vendor reports a payable amount, then the A/P account is not complete. Observation— Watching a process or procedure being performed by the entity's personnel or the performance of control activities

Observe client’s personnel as they receive goods to be sure that the person receiving the goods performs a count of the goods received and signs for the receipt. Observe that the receiving report does not already include the quantity, which forces the receiving clerk to perform a count.

This is a test of controls that provides evidence to support the existence and completeness assertion. If the clerk was not properly counting, the inventory balance could be either overstated or understated if the proper amount was not received.

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Audit procedure 2 - notes

Course: Auditing (ACG 4651)

6 Documents
Students shared 6 documents in this course

University: University of West Florida

Was this document helpful?
Audit procedure Example
Inspection of records or
documents
Inspect a sample of purchase
orders and trace the PO to
receiving report, vendor invoice,
purchase journal, and A/P general
ledger account
Inspect a sample of accounts
from the subsidiary A/
p ledger. Vouch those balances by
inspecting supporting purchase
order and receiving report
Select a sample of cash
disbursements from the first 10
days of the subsequent period
and if the disbursement was
related to a purchased item that
was received in the current year,
trace the amount to the A/P
general ledger at year end to be
sure that the payable was
properly booked in the current
period.
Completeness of
purchases and accounts
payable
Existence of purchases
and accounts payable.
Completeness of
purchases and accounts
payable
Inspection of tangible
assets—Physically
examining an asset
If the purchase was for a fixed
asset, then the auditor could
inspect the physical asset
purchased.
However, for purchases of
inventory, this is often impossible,
as the purchased inventory my
have been sold, or the purchased
inventory may be a fungible asset
for which specific identification is
not possible.
This is a substantive test
of the existence assertion.

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