Please enable JavaScript.
Coggle requires JavaScript to display documents.
Substantive Procedures - Coggle Diagram
Substantive Procedures
Common Ommissions
4 A's
-Accounting issues; IFRS
-Allowances; obsolescence, doubtful debts, depreciation/impairment
-Analytical Review Procedures
-Arithmetic Accuracy
MEAT
-Minutes of meeting
-Expert;
•qualification & experience
•evaluate conclusion
-Adjustments (esp. @ YE)
-Tax (deferred & current)
3 S's
-Schedule of balances
-Sample of transactions
-System; adequacy of controls & competence of staff
CRAP-M
-Cut-off
-Representation letter
-Agree;
•schedules
•opening balances
•closing balances to GL, TB, FS
•subsidiary ledger5s to control accounts
-Present Value
-Models & Assumptions
Revenue
General
-Mgmt. rep letter with regards to revenue
-Obtain schedule w/ regards to changes in revenue balances
•Agree opening balances
•Re-perform arithmetic accuracy of schedule
-Consider adequacy of system & competency of staff
-Enquire regarding models used for revenue recognition
-Ensure VAT is excluded from all amounts recognised
Sale of Goods
-General procedures for transactions
-For contracts or with a few large customers have confirmation
Bill & Hold Sales
-Verify risks & rewards of ownership have passed
-Is installation a significant event & will ownership only transfer after that?
-Inspect contracts for details of transfer of risks & rewards
-Verify that items sold have been excluded from inventory
-If above isn't met, verify that revenue in relation to above is deferred
Advertising & Subscriptions
-Inspect contracts and invoices
-For subscriptions, repertory calc of monthly fees
-Re-perform calculation of revenue & amounts deferred
-For adverts, inspect ads for publication
-If not yet published, inspect for deferral of revenue
Loyalty Points
-Separate component of revenue
-Re-perform calc of FV of points
-Re-perform calc of revenue deferred & subsequently recognised
-Enquire from mgmt. regarding models used to determine point system
-Inspect supporting docs
-Consider reasonability
Multiple Components
-Inspect contracts/sales agreements for t&c's
-Agree FV of each component used to supporting docs
-Reperform calc of FV
-Verify services provided over one year are discounted to PV
-Reperform PV calc
-Appropriate allocation of FV to components
Warranties
-Inspect contracts/sales agreements for t&c's
-Verify that warranty expense isn't netted off against revenue
-Enquire regarding models/estimates used to determine expected uptake of warranties
Services
-Inspect contracts for terms of service agreement
-Verify it has been signed by customers
-Inspect costly contracts & verify contract income will be > cost
-Check expenditure to date to supporting docs
-Compare annual expenditure to budgets
-Reperform calc of percentage of completion & revenue received/deferred
Trade Receivables
-
Existence
-For sample of debtors perform a positive circularisation
-Investigate any no-responses
-Project errors onto entire population
-Perform subsequent receipts testing
-
Valuation & Accuracy
-From testing of sales
-Re-perform arithmetic accuracy of a sample of invoices
-Review debtors list for credit balances
-PV & Discounting reperformance
-Reperform translations at spot
-Reperform calc of individual debtors balances
Rights & Obligations
-Enquire from mgmt. whether debtors book has been factored
-Obtain confirmation from bank
-Inspect mins of board meeting for evidence of factoring etc.
Bad Debts & Allowance for Doubtful Debts
-Inspect debtors age analysis & identify long debts
-Enquire from mgmt. as to the recoverability of amounts
-Perform extensive ARPs on allowances
-Policies & models to estimate allowances
General
-Obtain a schedule of movements & balances
-Consider adequacy of system
-Verify VAT is included in receivable balance
-Reperform recons of debtors ledger to accounts receivable