Given that controls are considered reliable, substantive testing would be limited. The auditor could also use many other types of software and spreadsheets, such as Excel, and automated working papers, which can aid in such tasks as calculating a trial balance, analytical procedures and undertaking complex calculations.
When there are significant variances from logical or historical relationships, the auditor should obtain explanations, consider whether they are reasonable Inventory auditing and instructor resource manual follow up on information gained through these explanations.
Ensure any claims for credit as a result of the returns are appropriately supported and that all such claims have been included. Situation i Accounts payable and purchases Completeness: It is worth pointing out that the auditor is most interested in ensuring the completeness of these equity account balances.
Employee fraud Analytical procedures. Complete tests to determine that the inventory is valued at cost and that no profit is included.
There also needs to be testing for obsolete, excess or slow-moving items, including checking subsequent sales prices to verify whether net realisable value is lower than cost. Ideally, substantive tests of details are performed at or close to year end and there is nothing to indicate this cannot be done for WAD Pty Ltd.
Review the transfer schedule, together with bank statements and bank reconciliations, to ensure that all transfers between bank accounts are accounted for in the same period for the transferor and the transferee. Review of aged trial balance to identify overdue debts.
Examples of these account balances with the related statement of financial position accounts shown parenthetically include depreciation expense property, plant and equipment and interest expense loans or notes payable.
When performing counts the auditor may test both the completeness and the existence of inventory by tracing items selected from the records to the physical inventory existenceand items selected from the physical inventory to the count records completeness.
The auditor also needs to ensure that the inventory flow assumption used to assign costs to inventory are in accordance with an acceptable accounting method, such as first-in, first-out FIFO or average cost, and check the consistency of the accounting method and the methods of application.
Verify some of the amounts against statements received from the consignee. Follow up on requests. Given the lack of controls high control risk and the materiality of purchases, it is likely that a significant level of substantive tests of detail will need to be performed, i.
Test the year-end cutoffs of sales and shipments. Review of subsequent receipts for evidence as to whether debts have been subsequently paid.
The auditor also considers cut-off procedures, including details of the movement of inventory just before, during and after the count, so that the accounting for such movements can be checked at a later date. Owing to movement of funds around year end, cut-off is likely to be of concern.
You are currently viewing a preview The preview contains 14 out of 27 pages. Sign in here Chapter 09 Substantive tests of transactions and balances Learning objectives 9. This category includes those income statement account balances that are tested indirectly as a result of substantive tests of related statement of financial position accounts.
Non-current assets The major point to highlight here is that with very few transactions occurring in a year, the auditor, satisfied with the prior-year balance, will verify the major transactions for the year.
Owing to the transfer arrangement there might be some concern as to who has ownership of the funds within the bank accounts of Reliable Communications and its subsidiaries.
Make tests of records supporting the inventory of goods in warehouses.
Any amounts not paid should be traced to invoices and delivery dockets. The auditor undertakes substantive tests to reduce detection risk. Undertaking analytical procedures to identify revenue or gross profit changes that are significantly disproportionate to changes in the level or volume of activity.
The following additional procedures may be undertaken on a test basis. The complex transfer arrangements for cash may be accounted for twice i. The major problem is understatement, so the auditor pays much more attention to completeness.
Students should be made aware of the double-entry accounting system, for which when one side of a transaction is tested the other side is tested automatically.Instructor Resource Manual Mark S.
Beasley Frank A. Buckless Steven M. Glover Audit Tests and Risk Assessment for the Revenue Cycle This casebook contains a collection of 49 auditing cases plus a separate learning module about. Chapter 09 Substantive tests of transactions and balances Learning objectives Identify and distinguish between tests of controls, substantive tests of transactions and substantive tests of balances.
Identify and understand when the auditor will undertake substantive audit procedures in response to specific assessed risks of material.
Auditing cases audit business economics scribd, auditing cases instructor resource manual f our th e d i ti o n mark s beasley 79 realities of audit related litigation instructor resource manual — do not copy or redistribute i 39 risk analysis and.
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Auditing, 12e (Arens) Chapter 1 The Demand for an Auditing and Assurance Profession Identify the components of an audit and explain why there is a demand for audits 1) Which of the following illustrates the definition of auditing with respect to the evidence analysis process?
Inventory: Auditing and Instructor Resource Manual Essay Words | 35 Pages. to sales and cash receipts transactions.
    To illustrate the linkage of.Download