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Audit procedure - notes

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Course

Auditing (ACG 4651)

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University of West Florida

Academic year: 2023/2024

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Audit procedure Example Assertion Inspection of records or documents

Inspect a sample of sales orders and trace the order to packing slip, sales invoice, sales journal, and general ledger

Inspect a sample of accounts from the subsidiary A/R ledger. Vouch those balances by inspecting supporting invoice and shipping documentation.

Completeness of A/R and sales revenue

This is a substantive test of the existence of A/R

Inspection of tangible assets—Physically examining an asset

I can’t think of any physical assets that the auditor could examine to support any of the A/R or revenue assertions. If you can think of any, I’ll give you a bonus point. Inquiry—verbal or written information of knowledgeable persons within the organization;

Inquiry of credit sales manager regarding the collectability of specific past-due receivables

Inquire about credit approval process

This is a substantive test of valuation of A/R

This is a risk assessment procedure that provides guidance for planning substantive tests of the collectability of accounts receivable External confirmation— written response about a particular item received directly to the auditor from a third party (e., debtor, creditor)

Select a sample of accounts from the subsidiary A/R ledger and confirm those balances by requesting that the customers communicate directly with the auditor.

This is a substantive test of the existence of A/R. It also provides evidence about rights.

Observation—Watching a control activity being performed by the entity's personnel or being performed by an automated process, e., physical or digital robotics

I can’t think of any observation procedures for A/R or revenue. If you can think of any, I’ll give you a bonus point.

Recalculation—Testing the mathematical accuracy of documents or records

 Recalculate the allowance for doubtful accounts based on the aged trial balance.  Foot the A/R aged T/B  Recompute a sample of sales invoice extension (number of items x sale price per item) and sales tax (based on applicable jurisdiction)

Substantive test of accuracy

Reperformance—An independent execution of procedures or controls that were originally performed by the client

Reperform a customer credit sales limits by processing a dummy credit sales transaction that exceeds the credit limit and observe that the EDP system rejects the sale and sends an exception report to a person who is not responsible for authorizing the sale or recording the sale.

This client control procedure assures that customers do not accumulate large credit balances that may result in uncollectable accounts, thus this is a test of controls that addresses the valuation assertion.

Analytical procedures— Evaluations of financial information through analysis of plausible relationships among both financial and nonfinancial data

Compare accounts receivable turnover in current year with prior years and with industry averages.

Compute allowance for doubtful account as percent of A/R and compare this percentage with prior years and with industry averages

Valuation of A/R

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Audit procedure - 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 Assertion

Inspection of records or

documents

Inspect a sample of sales

orders and trace the order

to packing slip, sales

invoice, sales journal, and

general ledger

Inspect a sample of

accounts from the

subsidiary A/R ledger. Vouch

those balances by

inspecting supporting

invoice and shipping

documentation.

Completeness of A/R

and sales revenue

This is a substantive test

of the existence of A/R

Inspection of tangible

assets—Physically

examining an asset

I can’t think of any physical assets that the auditor

could examine to support any of the A/R or revenue

assertions. If you can think of any, I’ll give you a bonus

point.

Inquiry—verbal or written

information of knowledgeable

persons within the

organization;

Inquiry of credit sales

manager regarding the

collectability of specific

past-due receivables

Inquire about credit

approval process

This is a substantive test

of valuation of A/R

This is a risk assessment

procedure that provides

guidance for planning

substantive tests of the

collectability of accounts

receivable

External confirmation—

written response about a

particular item received

directly to the auditor from a

third party (e.g., debtor,

creditor)

Select a sample of accounts

from the subsidiary A/R

ledger and confirm those

balances by requesting that

the customers communicate

directly with the auditor.

This is a substantive test

of the existence of A/R.

It also provides evidence

about rights.

Audit procedure - notes

Auditing (ACG 4651)

University of West Florida

Comments

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Preview text

Audit procedure - notes

Course: Auditing (ACG 4651)

University: University of West Florida

Students also viewed

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