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Substantive Testing of Cash

Assertions Audit Objectives Audit Procedures


I. Existence or A. To determine whether cash exists at 1 Obtain analysis of cash balace and
Occurrence year-end and cash-related reconcile to the general ledger,
transactions occur within the year.

B. To determine that all cash balances of 2 Confirm bank balances as balance


the client are reflected on the balance sheet date.
sheet at year-end.

3 Perform cash count procedures for


cash on hand.
4 Obtain (prepare) bank reconciliations
as of the balance sheet date.

5 Trace all transfers occuring between


banks near year-end.
II. Completeness C. To determine whether all cash 6 Obtain a cut-off bank statement
transactions are recorded in the containing transactions several days
proper accounting period, subsequent to the balance sheet date.
Examine items returned with the cut-
off bank statements.

7 Prepare proof of cash and reconcile


cash transactions occuring during
during a specified period as they are
recorded by the bank and the client.

8 Verify the client's cut-off of cash


receipts and cash disbursements.
III. Rights nad D. To determine that cash balances are 9 Review bank statements and the bank
Obligations available for use without restrictions replies to confirmation letters.
or if with restrictions, properly
indicated in the balance sheet.

IV. Valuation or E. To determine if cash is recorded and 10 Verify existence of cash in banks under
Allocation presented at the proper amount. receivership, cash subject to court's
restraining order, in foreign banks and
in foreign currency. This is in addition
to the foregoing procedures which will
enable the auditor to verify proper
valuation of cash.

V. Presentation F. To determine whether cash is 11 Investigate any checks reprensenting


and Disclosure presented in accordance with large or unusual payments to related
generally accepted accounting parties.
principle.
12 Evaluate proper financial statement
presentation and disclosure of cash.
wps ref Done by date remarks
Substantive Test of Recievables and Sales
Assertions Audit Objectives Audit Procedures
I. Existence or A. To determine that receivables 1 Obtain schedule of aged
Occurrence exist and represent bona fide trade accounts
obligations owed to the company receivable and notes
as of the balance sheet date. recievable schedule and
reconcile to ledgers.

II. Rights and Obligations 2 Confirm receivables with


debtors.
3 Inspect notes on hand.
4 Perform analytical
procedures to
determine whether
recorded sales and
receivables balances
appear reasonable.

III. Completeness B. To determine that all transactions 5 Test cutoff of sales and
relative to receivables have been sales returns to
recorded in the proper determine whether
accounting period. receivables are recorded
in the proper accounting
period.

IV. Valuation or Allocation C. To determine that receivables are 6 Review collectibility of


recorded and presented at receivables and
proper amounts in accordance determine the adequacy
with PAS/PFRS. of allowance for
doubtful accounts.

7 Recalculate the interest


income from the notes
receivable.
V. Presentation and D. To determine that the receivables 8 Evaluate financial
Disclosure are properly presented and statement presentation
classified in the balance sheet. and disclosure of
receivables.
9 Obtain written client
representations
regarding pledge,
discount or assignment
of receivale, and about
receivables from
officers, directors,
affiliates or other related
parties.
wps ref Done by date remarks
Substantive Tests of Inventories and Cost of Goods Sold

Assertions Audit Objectives Audit Procedures wps ref


I. Existence or A. To Determine whether 1 Obtain listings of
Occurrence inventories exist at year-end and inventory and reconcile
represent items held for sale in to ledgers
the ordinary course of business.

2 Observe the taking of


physical inventory and
conduct test counts.

3 Confirm inventories in
public warehouse and
with consignees.
II. Completene B. 1 To determine whether all 4 Obtain a final inventory
ss transactions related to inventory listings from client.
are ecorded in the proper
accounting period.

2 To determine that inventory A. Trace test counts made


listings are accurately compiled during the inventory
and inventory quantities include observation into
all items on hand and in transit. inventory listing.

B. Test the clerical


accuracy of the final
inventory listing.
5 Review the year-end
cutoff of purchases and
sales transactions.

6 Test numerical
sequence of inventory
purchase requisition.
7 Review entries to cost
of goods sold.
8 Perform analytical
review related to
inventories and cost of
goods sold.
III. Rights and C. To determine whether the 9 Make inquiries of
Obligations company has legal title or management regarding
ownership rights to inventory inventory ownership
items and inventories exclude and examine
items billed to customers or consignment
IV. Valuation or D owned
To by others.
determine whether the 10 agreements.
Evaluate the bases and
Allocation inventoriesare properly stated methods of inventory
with respect to pricing.
1 Cost determined by an 11 Vouch and test
acceptable method consistently inventory pricing.
applied.
2 Slow-moving, excess, defective, 12 Check inventory for
and absolete items identified quality and/or
and reduced to replacement obsolescence.
cost or net realizable value if
lower than cost.

V. Presentation E To determine that the 13 Determine the


and inventories and cost of goods existence of pledge
Disclosure sold are presented nd classified inventory,
in the financial statements in
accordance with PAS/PFRS.

14 Evaluate financial
statement presentation
of inventories and cost
of goods sold, including
the adequacy of
disclosure.
Done by date remarks
Substantive Tests of Investments

Assertions Audit Objectives Audit Procedures


I. Existence or Occurrence A. To determine that 1 Obtain or prepare a listing
investments in securities of securities and
(shares, bonds, notes) investments owned by the
physically exist and in loans company and related
and advances exist. revenue accounts and
reconcile to the general
ledger.

2 Inspect securities on hand.

3 Obtain confirmation of
securities held ny others.

II. Completeness B. To determine that 4 In addition to audit


investments are all included procedures 2 and 3, vouch
in the statement of financial selected purchases and
position. sales transactions of
securities during the year.

III. Rights and Obligations C. To determine that the 5 In addition to audit


company owns or has procedures 2 and 3, verify
ownership rights to all the clients' cutoff of
investments included in the securities transactions.
statement of financial
position.

6 Perform analytical
procedured
7 Compute independently
revenue fron securities.
IV. Valuation D To determine that 8 Determine market value of
investments are valued securities at balance sheet
properly in accordance with date.
generally accepted
accounting principles.

9 Evaluate the method of


accounting for securities.
V. Presentation and E. Investments are properly 10 Evaluate financial
Disclosure described and classified in statement presentation
the statement of financial and related revenue or
position and related loss accounts.
disclosures are adequate.
wps ref Done by date remarks
Substantive Testing PPE
Assertions Audit Objectives Audit Procedures
I. Existence or A. To determine whether property and 1 Obtain or prepare a summary of
Occurrence equipment included in the statement of property and equipment transactions
financial position physically exist. Additions and analysis of the accumulated
include only the capitalizable cost of assets depreciation during the year and
purchased, constructed, or leased and reconcile to ledger.
retirements are removed.

2 Conduct physical inspection of major


acquisition of plant and equipment.

II. Completenes B. To determine that property and equipment 3 Vouch additions to property and
s include all capitalizable costs and equipment during the year.
capitalizable costs are not expensed.

4 Investigate disposals and retirements of


property and equipment during the
year.

III. Rights and C. To determine that the company has legal 5 Examine evidence of legal ownership of
Obligations title or equivalent ownership rights to property and equipment.
property and equipment included in the
statement of financial position and the
statement of financial position and the
related lease obligation of capitalized
leased assets is recognized.

6 Examine lease agreement on property


and equipment leased to and from
others.

7 Review rental revenue from land,


buildings and equipment owned by the
client but leased to others.

IV. Valuation or D. To determine that property and equipment 8 Analyze repair and maintenance
Allocation is stated at cost and allowances for expense accounts.
depreciation or depletion are computed on
the basis of acceptable and consistent
methods.

9 Investigate status of property and


equipment not in current use.
10 Test client's computation of
depreciation.
11 Perform analytical procedures for
property and equipment.
V. Presentation E. To determine that property and equipment 12 Review financial statement presentation
and are properly described and classified in the and disclosure for property and
Disclosure statement of financial position and related equipment and for related revenue and
disclosure and adequate. expenses.
wps ref Done by date remarks
Substantive tests of Intangible Assets
Assertions Audit Objectives Audit Procedures
I. Existence or Occurrence A. To determine that intangibles exist 1 Obtain an analysis of
and are represented by contractual ledger accounts for
rights, privileges or earning power intangibles
owned by the company.

2 Examine documentation
supporting intangibles.

II. Completeness B. To determine that all transactions 3 Vouch additions to or


related to intangibles have been acquisitions during the
properly recorded. year.

4 Evaluate dispositions and


writeoffs during the year.

III. Rights and Obligations C. To determine that the intangibles 5 In addition to audit
are owned by the company. procedure no. 2 perform
analytical procedures.

IV. Valuation or Allocation D. To determine that intangibles are


6 In addition to audit
stated at cost less amortization. procedure nos. 3 & 4,
evaluate amortization
policy and verify
V. Presentation and DisclosuE. To determine whether presentation 7 Evaluate financial
computation of
and disclosures concerning statement presentation
amortization.
intangibles are adequate and in and disclosure for
accordance with PAS/PFRS. intagibles.
wps ref Done by date remarks
Substantive Tests of Prepaid Expenses and Deferred Charges
A. Prepaid Expenses

1 Prepaid Expenses
a. Inspect insurance policies on a test basis.
b. Review coverage premiums.
c. Vouch premium paid and amounts charged to expense during the year and
amounts prepaid at year-end.

2 Prepaid Advertising
a. Examine advertising contracts with advertising agencies and note effective dates
covered by the agreement. Determine propriety of charges in the current year.

b. Test-count undated advertising and sales promotion materials.


3 Prepaid Rent
a. Examine signed rental agreement noting the effective dates covered by the
agreement.
b. Vouch total amount paid and compare with provisiob in the rental agreement.

c. Verify distribution of the prepaid amount to prepaid rent and rental expense by
recalculating the amounts.
4 Prepaid Intereset
a. Examine loan agreement and vouch interest payments.
b. Verify mathematical accuracy of the computation of interest expense and prepaid
interest.
5 Office Supplies
a. Vouch purchases of office supplies on a test basis
b. Conduct physical count of supplies inventory on a test basis.
6 Other Prepayments
a. Review existence of adequate records and documentation.
b. Evaluate allocation of prepaid expenses between asset and expense accounts.

B. Deferred Charges

1 Plant rearrangements costs


a. Vouch charges to plant rearragement costs.
b. Review propriety of amortization policy.
c. Verify computation of amortization of plant rearragements costs for the current
years.

2 Deferred Bond Issue Costs


a. Vouch expenditures related to the issueance of bonds.
b. Verify mathematical correctness of amortization of bond issue costs chargeable to
the current year.
3 Other Deferred Charges
a. Evaluate allocation of deferred charges between asset and expense accounts.
wps ref Done by date remarks
Substantive Tests of Liabilities
Assertions Audit Objectives Audit Procedures
I. Existence or A. To determine that payables 1 Obtain from the client a
Occurrence exist as of the balance sheet listing of accounts and notes
date. payable as of year-end and
reconcile to the general
ledger.

2 Vouch recorded liabilities to


vendors' statements.
3 Confirm recorded liabilities
directly with suppliers and
creditors. Investigate
differences in liabilities
reported in the confirmations
with the recorded book
amounts.

4 Examine bank confirmations


for loans.
II. Completeness B. To determine that all 5 Perform purchases cutoff
transactions relating to examination.
payables have been properly
recorded.

6 Test for unrecorded liabilities.

7 Perform analytical
procedures.
III. Rights and C. To determine that payables 8 In addition to audit procedure
Obligation represent valid and legal no. 3, review documentation
claims of third parties from in client's files.
the client.

9 Examine subsequent
payments to creditors.
IV. Valuaation or D. To determine that payables are 10 Vouch accounts payable
Allocation recorded at the proper schedule.
amount.
11 Test computation of accrued
or prepaid interest.
V. Presentation and E. To determine that payables are 12 Scan list of payables to major
Disclosure presented and disclosed type of obligation is properly
according to PAS/PFRS. described and classified.
Determine that contingent
liabilities are properly
diclosed.

13 Obtain client's representation


letter.
wps ref Done by date remarks
Substantive Tests of Owners' Equity Accounts
Assertions Audit Objectives Audit Procedures
I. Existence or A. To determine the validity of 1 Obtain schedules of shareholders'
Occurrence recorded shareholders' equity equity accounts and reconcile to
balances and whether the the general ledger balances.
transactions actually occurred.

2 Review authorizations and terms of


share issues.
3 Confirm shares outstanding with
registrar on share and tranfer
agent.
4 Inspect share certificate book.
5 Inspect certificates of shares held in
treasury.
II. Completeness B. To determine whether recorded 6 In addition to the above mentioned
shareholders' equity accounts procedures, perform analytical
reflect all data that should be review procedures.
recorded.

III. Rights and C. To determine whether the 7 Review articles of incorporation


Obligation entity has the authority and and by laws.
execute the shareholders'
equity transactions, e.g.,
whether share capital was
legally issued and shareholders
have a legal claim on corporate
assets at the balance sheet
date.

8 Make inquires of legal counsel.


IV. Valuation or D. To determine whether the 9 Vouch share capital entries,
Allocation shareholders' equity balances dividend entries and entries to
are shown in the proper retained earnings.
statement amounts in
accordance with PAS/PFRS.

V. Presentation and E. To determine that the 10 Review minutes of board directors'


Disclosure shareholders' equity accounts and shareholders' meetings for
are properly presented in the share options and dividend
statement of financial position, restrictios.

11 Evaluate financial statement


presentation and disclosure for
shareholders' equity accounts.
wps ref Done by date remarks
Substantive Audit of the Revenue and Expense Accounts
Audit Objectives

The objectives (assertions) in the audit of revenue and expence are:


1 To determine whether all (completeness) revenues and expenses (rights and
obligations) applicable to the audit period (occurrence) have been recognized and
are matched properly (allocation) in accordance with generally accepted
accounting principles.

2 To Determine whether all material unusual and infrequent items are segregated
properly in the statement of comprehensive income (presentation).

3 To determine whether revenues and expenses are classified properly and


consistently (presentation).
4 To determine whether disclosures concerning revenue and expense are adequate
and in accordance with generally accepted accounting principles (disclosure).

Audit Procedures
1 Analytical review of operations
2 Account Analysis
1 Obtain copy of the General ledger entry of the Following:

General Reserve Fund


Opttional Fund
CETF-Local
CDF

Analized changes of the above accounts