Professional Documents
Culture Documents
1. Identify the item to test and set the objectives of the test;
5. Record the test, method, results and other evidence as working papers; and
The objective of a substantive test must be at least one of these financial statement assertions:
C → Completeness C → Cut-off
A
→ Allocation and valuation C → Classification and understandability
V
E → Existence A → Accuracy
● Trial balance: To agree the balance in the financial statements to the trial balance;
● Opening balance: To agree the opening balance to last year's closing balance and investigate any
differences with the client;
● Add up and recalculate: All balances need to be checked for accuracy; and
● Disclosure check: To review any specific accounting standards relating to the area of the financial
statements and ensure they have been followed when preparing the financial statements.
NON-CURRENT ASSETS
In order to ensure non-current assets are audited effectively, the auditor will need to review:
● The financial statements, including the statement of financial position and the non-current asset note;
● The asset register, which includes all details relating to the assets held by the company; and
● The trial balance and ledger accounts forming the non-current asset balance.
● Completeness (C);
● Existence (E).
The auditor needs to ensure that each balance has been audited, therefore auditing:
b. Adding up the non-current asset note to ensure the auditor agrees with the closing balance
shown; and
c. Agreeing the closing balance for non-current assets in the note, to the balance shown on the
statement of financial position.
a. Agreeing the additions balance in the financial statements to the asset register (C);
b. Adding up the additions in the asset register to ensure they agree with the total in the financial
statements (C); and
c. For additions in the year, trace to invoice, to agree amounts recorded and whether the invoice is
in the company name (R&O).
a. Obtain a list of all disposals of assets made in the year and agree them to the asset register to
ensure they have now been removed (E and A);
b. Agree disposals to documentation, for example, sales receipts and bank statements to prove
they were disposed of (E and A); and
c. Review the profit or loss on disposal and agree with what has been recorded in the statement of
profit and loss (E and A).
b. Reviewing the accounting policies to see if the treatment being used is consistent with prior
years’ (V and A); and
c. Inspecting the budgets for capital expenditure to see if plans for disposals and new assets mean
the depreciation methods are appropriate (V and A).
a. Inspect the valuer's report and agree the amount concluded by them with what has been
recorded in the financial statements (V); and
b. Review the methods used by the valuer described in their report and ensure they agree with
what is required by the accounting standards for revaluations (V).
Notes:
● The key for an auditor is to gather as much sufficient appropriate evidence as possible.
● The more written, detailed, independent evidence auditors can collect, the better.
● Each audit procedure must verify at least one of the financial statement assertions.