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III.

Substantive Testing of Balances and Analytical Procedures


1. Substantive Testing of Cash
I. Assertions Existence or Occurrence Audit Objectives A. To determine whether cash exists at day-end and cash-related transactions occur within the day. B. To determine that all cash balances of the client are reflected on the balance sheet at day-end. C. To determine whether all cash transactions are recorded in the proper accounting period. Audit Procedures 1. Obtain analysis of cash balance and reconcile to the general ledger. 2. Confirm cash balances as of balance sheet date. 3. Perform cash count procedures for cash on hand. 4. Prepare proof of cash and reconcile cash transaction occurring during a specified period as they are recorded by the client. 5. Verify the clients cut-off of cash receipts and cash disbursements. 6. Verify cash on hand under receivership. This is in addition to the foregoing procedures which will enable the auditor to verify proper valuation of cash. 7. Investigate any voucher representing large or unusual payments to related parties. 8. Evaluate proper financial statements presentation and disclosure of cash.

II.

Completeness

III.

Valuation or Allocation

D. To determine if cash is recorded and presented at the proper amount.

IV.

Presentation and Disclosure

E. To determine whether cash is presented in accordance with GAAP.

2. Substantive Testing of Sales


I. II. III. Assertions Existence or Occurrence Rights and Obligations. Completeness Audit Objectives Audit Procedures 1. Perform analytical procedures to determine whether recorded sales appear reasonable. 2. Test cut-off of sales which are recorded in the proper accounting period.

A. To determine that all transactions relative to sales have been recorded in the proper accounting period.

3. Substantive Testing of Cost of Goods Sold


I. Assertions Existence or Occurrence Audit Objectives A. To determine whether inventories exist at day-end and represent items held for sale in the ordinary course of business. B. 1. To determine whether all transactions related to inventory are recorded in the proper accounting period. 2. To determine that inventory listings are accurately compiled and inventory quantities include all items on hand. Audit Procedures 1. Obtain listings of inventory and reconcile to ledgers. 2. Observe the taking of physical inventory and conduct test counts. 3. Obtain a final inventory from the client. A. Trace test counts made during the inventory observation into inventory listing. B. Test the clerical accuracy of the final inventory listing. 4. Review the dayend cut-off of purchases and sales transactions. 5. Test numerical sequence of inventory

II.

Completeness

III.

Valuation or Alocation

IV.

Presentation and Disclosure

C. To determine whether the inventories are properly stated with respect to Cost determine by an acceptable method consistently applied. D. To determine that the inventories and cost of goods sold are presented and classified in the financial statements in accordance with PAS or PFRS.

purchase requisition. 6. Review entries to cost of goods sold. 7. Perform analytical review related to inventories and cost of goods sold. 8. Evaluate the basis and methods of inventory pricing. 9. Vouch and test inventory pricing. 10. Check inventory for quality and/ or obsolescence.

11. Determine the existence of inventory. 12. Evaluate financial statement presentation of inventories and cost of goods sold including adequacy of disclosure.

4. Substantive Testing of Prepaid Expenses (Supplies)


Assertions Audit Objectives 1. To ascertain the correctness of prepaid or deferred amount at the end of the period as well as the amounts consume or had expired, if any, during the period under review. Audit Procedures A. Vouch purchases of supplies on a test basis. B. Conduct physical count of supplies inventory on a test basis.