Income statement

The income statement reflects a company's financial performance over a specific period. It shows
revenues earned and expenses incurred, resulting in either a profit or loss for the company.

Assertions Checked by the Auditor:

● Revenue:
● Occurrence: Ensuring recorded sales actually happened and relate to the entity.
● Cut-off: Verifying transactions are recorded in the correct accounting period.
● Expenses:
● Accuracy: Checking that expenses are correctly recorded.
● Completeness: Ensuring all expenses incurred are accounted for.

Audit Procedures:

● Revenue:
● Review of Transactions: Examining sales invoices, supporting documents, and
customer orders.
● External Confirmation: Confirming transactions with customers or through bank
statements.
● Expenses:
● Documentation Review: Inspecting invoices, contracts, and expense reports.
● Analytical Procedures: Assessing expenses against historical data or industry
benchmarks to identify inconsistencies.

Revenue:
Revenue is the total income a company earns from its primary business activities, like selling goods or
providing services, during a specific period.

Assertions Checked by the Auditor:

● Occurrence: Ensuring that recorded sales actually occurred and are related to the
company.
● Cut-off: Verifying that transactions are recorded in the correct accounting period.

Audit Procedures:
● Review of Transactions: Examining sales invoices, contracts, and supporting documents to
validate sales.
● External Confirmation: Contacting customers or using bank statements to confirm sales
transactions.

Purchases and Other Expenses

 ● Purchases: These are costs incurred by a company when buying goods or services directly
related to its main business activities.
● Other Expenses: These encompass various costs beyond direct purchases, such as operating
expenses (e.g., rent, utilities), administrative expenses, or any other costs incurred in the
regular course of business operations.

Assertions Checked by the Auditor:

● Purchases:
● Accuracy: Checking that the costs recorded for purchases are precise and correct.
● Completeness: Ensuring all expenses directly linked to purchases are accounted for.
● Other Expenses:
● Accuracy: Confirming that the expenses recorded are accurately stated in the
financial records.
● Completeness: Ensuring all relevant expenses, apart from direct purchases, are properly
recorded.

Audit Procedures:
● Purchases:
● Reviewing Documentation: Checking purchase orders, invoices, and agreements to
verify accuracy.
● Reconciliation: Comparing purchase records with inventory counts to ensure
consistency.
● Other Expenses:
● Documentation Review: Inspecting expense reports, invoices, and agreements for
accuracy and completeness.
● Analytical Procedures: Comparing current expenses with historical data or
industry benchmarks to identify anomalies.

Payroll

Payroll is the process of calculating and distributing wages or salaries to employees for the work they've
done.

Assertions Checked by the Auditor:

● Accuracy: Ensuring that the wages and salaries paid to employees are calculated
accurately.
● Completeness: Checking that all employees' payments are recorded and nothing is missed.
● Existence: Verifying that the recorded payroll transactions actually happened.

Audit Procedures:
● Recalculation: Double-checking calculations to ensure accuracy.
 ● Review of Records: Examining payroll records and timesheets for accuracy and
completeness.
● Sample Testing: Selectively verifying a sample of employee payroll transactions to ensure
accuracy and proper authorization.
● Bank Reconciliation: Comparing payroll records with bank statements to confirm proper
recording and payment of wages.

Balance Sheet

The balance sheet is a financial statement that provides a snapshot of a company's financial position at a
specific point in time. It consists of assets, liabilities, and shareholders' equity.

Assertions Checked by the Auditor:

● Assets:
● Existence: Verifying that assets recorded actually exist.
● Valuation: Ensuring assets are valued correctly.
● Liabilities:
● Completeness: Checking that all obligations are included.
● Accuracy: Ensuring liabilities are accurately recorded.

Audit Procedures:
● Assets:
● Physical Verification: Physically inspecting tangible assets.
● Document Review: Examining deeds, contracts, and valuation reports.
● Liabilities:
● Confirmation: Confirming liabilities with external parties.
● Review of Agreements: Checking contracts and agreements related to liabilities.

Non current assets (tangible & intangible)

● Tangible Assets: These are physical assets like buildings, machinery, or land that a
company owns for the long term to support its operations.
● Intangible Assets: These are non-physical assets like patents, copyrights, or goodwill that
have value but lack a physical presence.

Assertions Checked by the Auditor:

● Tangible Assets:
● Existence: Verifying physical assets exist and are owned by the company.
● Valuation: Checking if the value of these assets is properly recorded in the
financial statements.
● Rights and Obligations: Ensuring the company has the right to use these assets.
● Intangible Assets:
● Existence: Verifying the existence and legal ownership of intangible assets.
 ● Valuation: Checking if the value of these assets is accurately stated in the
financial records.

Audit Procedures:
● Tangible Assets:
● Physical Inspection: Visually checking and confirming the existence of tangible
assets.
● Documentation Review: Checking ownership deeds, titles, or purchase
agreements.
● Valuation Assessment: Assessing the methods used to determine asset values.
● Intangible Assets:
● Legal Documentation Review: Examining patents, contracts, or copyrights to
confirm ownership.
● Valuation Evaluation: Reviewing methods used to value intangible assets, such as
assessing market comparisons or income projections.

Receivables
Receivables are amounts of money owed to a company by its customers or others for goods sold or
services provided on credit. These are assets on a company's balance sheet representing future cash
inflows.

Assertions Checked by the Auditor:

● Existence: Verifying that the receivables recorded actually exist and are valid.
● Valuation: Ensuring receivables are accurately valued at the amount expected to be
collected.
● Completeness: Confirming that all owed amounts are included, none are missing.
● Rights and Obligations: Verifying that the company has the legal right to collect these
receivables.

Audit Procedures:
● Document Review: Checking sales contracts, invoices, and customer payment history to
verify the existence and accuracy of receivables.
● Confirmation: Reaching out to customers to confirm the validity and amount of
receivables.
● Analytical Procedures: Comparing current receivable balances with past records or
industry averages to assess reasonableness.

Inventory
Inventory refers to the goods or products a company holds for sale or use in its operations. These could
be raw materials, work-in-progress items, or finished goods ready for sale.

Assertions Checked by the Auditor:

● Existence: Verifying that the inventory items actually exist.
 ● Valuation: Ensuring inventory is properly valued in the financial statements.
● Completeness: Confirming that all inventory owned or held by the company is recorded.
● Rights and Obligations: Ensuring the company has legal ownership or rights over the
inventory.

Audit Procedures:

● Physical Inventory Counts: Physically counting the inventory on hand to confirm

existence.
● Comparative Analysis: Comparing inventory records to previous periods or industry
norms to assess valuation.
● Review of Purchase and Sales Records: Checking purchase and sales documents to
verify completeness and accuracy of inventory records.
● Examination of Cost Allocation Methods: Reviewing how the company values its
inventory to ensure it aligns with accepted accounting practices.
● Confirmation with Third Parties: Contacting suppliers or customers to confirm
inventory details and ownership rights.

Bank And Cash

Bank refers to the money a company has in its bank accounts, allowing for transactions like deposits,
withdrawals, and payments. Cash represents physical money (coins and banknotes) held by the company.

Assertions Checked by the Auditor:

● Existence: Ensuring reported balances match actual amounts held in bank accounts and the
physical cash on hand.
● Valuation: Verifying that the reported balances in the financial statements are accurate.

Audit Procedures:
● Bank Reconciliations: Checking reported balances against bank statements to verify
accuracy.
● Physical Cash Counts: Conducting physical counts of cash to confirm its existence and
comparing it to recorded amounts.

Non Current Liabilities

Non-current liabilities are obligations or debts that a company owes, but they aren’t due for settlement
within the current accounting period. These typically include long-term loans, deferred tax liabilities,
bonds, and other obligations payable over an extended time frame.

Assertions Checked by the Auditor:

 ● Accuracy: Ensuring the reported amounts of non-current liabilities are correct.
● Completeness: Confirming that all long-term obligations are properly recorded.
● Classification: Verifying that these liabilities are correctly categorized as non-current and
not misclassified as current liabilities.
● Disclosure: Checking that these liabilities are appropriately disclosed in the financial
statements.

Audit Procedures:

● Document Review: Examining loan agreements, bond contracts, and other legal
documents to validate the accuracy and completeness of recorded liabilities.
● Confirmation: Confirming non-current liabilities directly with lenders or creditors.
● Classification Check: Reviewing terms and payment schedules to ensure proper
classification as non-current liabilities.
● Disclosure Examination: Verifying if all relevant information about these liabilities is
disclosed correctly in the financial statements.

Payable and accurals

● Payables: These are amounts a company owes to suppliers or creditors for goods or services
received but not yet paid for.
● Accruals: These are expenses or revenues that have been incurred or earned but haven't
been recorded in the financial statements.

Assertions Checked by the Auditor:

● Payables:
● Accuracy: Confirming that the amounts owed are accurately recorded.
● Completeness: Ensuring all amounts owed are included and nothing is missing.

● Accruals:
● Accuracy: Verifying that the accrued expenses or revenues are accurately
recognized.
● Completeness: Ensuring all expenses or revenues incurred are properly
recorded.
Audit Procedures:

● Payables:
● Confirmation: Directly confirming payables with suppliers or creditors.
● Analytical Procedures: Using analytical techniques to assess the
reasonableness of payable balances.
● Accruals:
● Document Review: Examining supporting documents and contracts to verify the
accuracy of accrued amounts.
 ● Analyzing Trends: Assessing trends and patterns to estimate the completeness of
accrued expenses or revenues.

Provisions
Provisions are like future IOUs a company sets aside. They're for things that might cost money later but
aren't certain yet. Imagine putting cash aside for a rainy day when you're not sure if it'll rain.

Assertions Checked by the Auditor:

● Existence: Confirming whether the provisions are real and whether they might actually be
needed.
● Completeness: Checking if all potential future expenses have been accounted for.
● Accuracy and Valuation: Verifying that the amounts set aside make sense and are based
on reasonable estimates.
● Rights & Obligations: Ensuring the company is obliged to settle these provisions.

Audit Procedures:
● Document Review: Checking papers and confirming with higher-ups to validate if these
provisions are needed.
● Amount Assessment: Reviewing the amounts set aside for these future expenses,
comparing them to industry standards or past data.
● Legal Verification: Checking legal obligations or contracts that might require the
company to pay for these provisions.
● Confirmation: Talking directly to involved parties to confirm the need and accuracy of these
provisions.

Accounting Estimates

Accounting estimates are approximations made by a company when exact figures aren't available.
They're educated guesses about future events or uncertain values, such as the lifespan of an asset or the
amount of bad debts a company might have.

Assertions Checked by the Auditor:

● Completeness: Ensuring all necessary estimates are included in the financial

statements.
● Accuracy: Verifying that the estimates are reasonable and fairly presented.
● Disclosure: Checking if all necessary information about the estimates is properly
disclosed in the financial statements.
. Audit Procedures:

● Comparative Analysis: Comparing current estimates with past data or industry

standards.
● Expert Assessment: Seeking opinions from experts in the relevant field to validate the
estimates.
● Document Review: Checking supporting papers and documentation for accuracy and
completeness.
● Disclosure Evaluation: Verifying that all necessary information about these estimates is
properly disclosed in the financial statements.

Share Capital, reserves and director’s remuneration

● Share Capital: Money invested by shareholders in a company for ownership.

● Reserves: Profits held by the company for specific purposes.
● Director’s Remuneration: Payments made to company directors for their services.

Assertions Checked by the Auditor:

● Share Capital:
● Existence and Occurrence: Confirming share issuance actually happened.
● Completeness: Checking if all issued shares are properly recorded.

● Reserves:
● Accuracy: Ensuring reserves are correctly calculated.
● Rights and Obligations: Validating the company's rights to reserves.

● Director’s Remuneration:
● Accuracy: Checking if remuneration is accurately recorded.
● Completeness: Ensuring all payments to directors are properly noted.

3. Audit Procedures:

● Share Capital:
● Document Review: Checking shareholder agreements and records of share
issuances.
● Confirmation: Confirming share issuances with shareholders or external sources.
● Reserves:
● Review of Calculations: Checking calculations used to determine reserves.
● Legal Confirmation: Ensuring legal documentation supports the company's rights to
reserves.
● Director’s Remuneration:
● Payroll Record Review: Examining payroll records and contracts related to
director payments.
● Confirmation: Confirming remuneration details with directors or relevant parties.