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Substantive testing - balance sheet (Cash (Assertions (Completeness (bank…
Substantive testing - balance sheet
Cash
Assertions
Completeness
bank reconciliation for cut - off
Classification
disclosure requirements
Existence
bank confirmation
Substantive tests
Always completed
confirm cash held by others (bank balances, reconciliations
test cut offs for receipts of cash on credit sales
Analytical procedures
compare listing of cash accounts with previous years and investigate unexpected changes
Other general procedures
review cash accounts in ledger for unusual activity
review bank confirmations, meeting minutes
Receivables
Assertions
Existence
tested by debtors confirmtion
Valuation and allocation
receipt tests
substantive tests
always completed
confirmation of receipts by shipping records, cash receipts, contracts
test cut off date by inspecting shipping documents, sales ledger
Correct estimation of doubtful debts
Analytical procedures
compare doubtful and bad debts, actual vs estimated and evaluate reasonableness of these estimates
Inventory
Assertions
Existence
Auditor can test stock take
check physical inventory
Valuation and allocation
Lower of cost and NRV
impaired stock
FIFO
Substantive testing
Test valuation of inventory
Test client procedures on inventory impairement
Test client costing methods
use another auditor to confirm valuation of stock in remote warehouses
PPE
Assertions
Existence
additions and disposals over the years
Valuation and allocation
fair value and asset impairment
test depreciation through reasonableness
Payables
Assertions
completeness
cut off testing
valuation and allocation
cut off testing, understating
substantive tests
Always completed
bank reconcilliations
inspect cut off by inspecting payment transaction files
perform search for unrecorded liabilities
analytical procedures
compare list of payables with previous periods,