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Chapter 13: Substantive procedure - Coggle Diagram
Chapter 13: Substantive procedure
NCA
Investment
confirmation of existence
confirmation of ownership
Intangible NCA
Majors risks
Existence
: exp capitalised inappropriately
Valuation
: wrong cost/valuation due to
inflating
, inappropriate
amortisation
or
impairment review
Source of evidence
Act standard/auditor knowledge of act standard
purchase invoice/docu
client calculation and schedule
specialist valuations
auditor understanding of entity for sign of impairment factors
Tangible NCA
Major risks
Right and obligation
: not actually own assets
Existence
: asset not actually exist/have been sold
Completeness
: omission of assets
Valuation
: overvalued assets by inflating cost/undercharging dep charge and adversely
Presentation and disclosure
: incorrectly presented in FS
Source of evidence
NCA asset register
Purchase invoice for asset purchased
Sale invoice for asset sold
registration docu/docu of title
valuation carried out by ees/3rd party valuer
leases/hired purchase docu
physical inspection of assets
dep record/calculations
Inventory
Key areas
Attending an inventory count
valuation at the lower of cost and NRV
confirmation of ownership
Major risks
Existence
: inventory not exist being included in FS
Completeness
: not all inventory included in FS
Valuation
: inventory included at full value may be obsolete/damaged
Right&Obligation
: inventory of the 3rd parties included in FS
Cut-off
: inventory sold included in FS
Source of infor
Company control over inventory counting
Auditor attendance over inventory counting
confirmation with third parties holding inventory/have inventory stored or by the client
purchase invoice for inventory
work-in-progress records for inventory
post year-end sale invoice - sale orders - list price
Inventory count instructions
Organization of count
Supervising by senior staff, including staff not normally involved
Tidying and marking inventory
Restriction & control of the production process and inventory movements
Identifying of damaged, obsolete, slow-moving, 3rd parties and returnable inventory
Counting
Systematic counting
Recording
Payables
Key areas
Ensuring that all liabilities in FS are included
Confirm that all liabilities are bona fide by the company
Major risks
Completeness
: understating liabilities in the FS
Cut-off
: between good inward and liabilities recording being incorrect
Existence, right and obligations
: non-existent liabilities being declared
Source of evidence
Payable ledger acc
Confirmation from supplier
Long-term liabilities
Major risks
Completeness
: not all long-term liabilities have been disclosed
Accuracy and cut-off
: interest payable has not been calculated correctly and in correct act period
Presentation and disclosure
: disclosure is incorrect