Pampanga Company-Substantive Test of Cash is an example problem from the book of Applied Auditing of Mrs. Ma. Elenita Balatbat Cabrera.
Description of test of control and substantive procedures while conducting an Audit.Full description
Description of test of control and substantive procedures while conducting an Audit.Full description
COMPLIANCE AND SUBSTANTIVE PROCEDURES IN AUDITING
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Substantive Audit Testing - revenue cycle.docx
project report on NPAs of private and public sector banks
Descripción: Pushover Analysis in Etabs
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CHAPTER 8 - PERFORMING SUBSTANTIVE TESTS Subs Substa tant ntiv ive e Tests ests - are are audi auditt proc proced edur ures es designed to substantiate the account balances or to detect material misstatements in the fnancial statements. Analytical Procedre! Procedre! - enab enable les s the the audi audito torr to obta obtain in corr corrob obor orat ativ ive e evidence about a particular account - involves comparison o fnancial inormation with audi audito tor’ r’s s expe expect ctat atio ions ns to dete determ rmin ine e the the reasonableness reasonableness o an account balance reported in the fnancial statements
Factors aecting the eectiveness o analytical procedures nature o the assertions reliability o data used to develop expectations precision o expectations predictability predictability o the accounts payable !enerali !enerali"atio "ations ns that are helpul helpul in assessing assessing the predictability o the accounts #nc #ncome stat tateme ement acc accoun ounts are are mor more pred predic icab able le comp compar ared ed to bala balanc nce e shee sheett accounts. $ccounts that are not sub%ect to management management discretion are generally predicable. &elati &elations onship hips s in a stabl stable e envir environ onmen mentt are more predictable than those in a dynamic or unstable environment.
$udit *vidence - reers to the inormation obta obtain ined ed by the the audi audito torr in arri arrivi ving ng at the the conclusions on which the audit opinion is based.
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Forms o test o details Test o details o balances - involves direct testing o the ending balance o an account Test est o deta detail ils s o tran transa sact ctio ions ns - invo involv lves es testing the transact-tions which give rise to the ending balance o an account
Factors aecting the eectiveness eectiveness o substantive tests (ature o substantive test - relates to the )uality o evidence Timing o substantive test - interim date or at year-end *xtent o substantive test - relates to the amount o evid eviden ence ce need needed ed to sati satis sy y a part partic icul ular ar ob%ective. S$!tanti%e Te!t %!& Te!t o" Control Tests o +ontrols provide evidence that indicates a missta misstatem tement ent is li'ely li'ely to occur occur.. Substa Substant ntive ive Tests provide provide evidence evidence about about the existenc existence e o misstatement in an account balance.
'ality o" E%idence Suiciency Suiciency - reers to the amount o evidence that the auditor should accumulate. Factors actors to be conside considered red in evaluati evaluating ng the suiciency o evidence +ompet eten ence ce o evid eviden ence ce - this this vari varies es +omp inversely with the amount o evidence that is suicient in a given situation. The more competent the evidence the less amount o evidence is needed to support the auditor’s opinion. /aterial iality ity o item item being being examin examined ed - the /ater more material the s amount being exam examin ined ed the the more more evid eviden ence ce will will be needed to support the validity. &is' involved in a particular amount - as the ris' o mis-statem mis-statement ent increase increases s the more evidence will be needed. *xperience e gained gained during during previou previous s audit audit *xperienc may indicate the amount o evidence ta'en beo beore re and and wh whet ethe herr such such evid eviden ence ce was was enough.
Te!t o" #etail! - involves examining the actual details ma'ing up the various account balances
,nder nderly lyin ing g acco accoun unti ting ng data ata - ree reers rs to accounting records +orrobor +orroborating ating inormati inormation on - supports supports ,$ ,$ obtained rom clients and other resources
$ppropriateness $ppropriateness - measures the )uality o aud audit evid vidence and and its relev elevan anc ce to a particular assertions and its reliability. - &ele &eleva vanc nce e - rela relate tes s the the time timeli line ness ss o evidence and its ability to satisy the audit ob%ective.
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&eliability - relates to the ob%ectivity o evidence and is in0uenced by its source and by its nature.
!enerali"ations that could help the auditor in assessing the reliability o audit evidence $udit evidence obtained rom independent outside sources is more reliable than that generated internally. $udit evidence generated internally is more reliable when the related accounting and internal control systems are eective. $udit evidence obtained directly by the auditor is more reliable than that obtained rom the entity. $udit evidence in the orm o documents and written representations is more reliable than oral representations.
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ma%or contracts engagement letter organi"ational chart analyses o long-term accounts internal control analyses +urrent fle - contains evidence gathered and conclusions reached relevant to the audit o a particular year. a copy o the fnancial statements audit program wor'ing trial balance lead schedules detailed schedules correspondence with other parties
Techni)ues used by auditor when preparing wor'ing papers 3eading #ndexing - reers to the use o letter or numbering system +ross-indexing4+ross reerencing - provides a trail useul to supervisors in reviewing the wor'ing papers Tic' mar's - symbols that describe the audit procedures perormed
$ccounting *stimates - means an approximation o the amounts o an item in the absence o a precise means o measurement.
$udit ocumentation or 1or'ing 2apers - are records 'ept by the auditor that documents the audit procedures applied inormation obtained and conclusions reached.
&elated 2arty - reers to the persons or entities that may have dealings with one another in which one party has the ability to exercise signifcant in0uence or control over the other party in ma'ing fnancial and operating decisions.
2rimary unctions o the wor'ing papers support the auditor’s opinion on the fnancial statements - support the auditor’s representation as to compliance with 2S$ the auditor in the planning - assist perormance review and supervision o the engagement
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Secondary unctions o the wor'ing papers planning uture audits providing inormation useul in rendering other services - providing ade)uate deense in case o litigation
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Cla!!i(cation o" )or*in+ ,a,er! 2ermanent fle - contains inormation o continuing signiy-cance to the auditor in perorming recurring audits - copies o the articles o incorporation and by-laws
*xpert - it is a person or frm possessing special s'ill 'nowledge and expertise in a particular feld other than accounting and auditing.
5inds o expert $uditor’s expert - an expert whose wor' in his4her feld o speciali"ation is used by the auditor to assist the auditor in obtaining suicient appropriate audit evidence. /anagement’s expert - an expert whose wor' is his4her feld o expertise is used by
the entity to assist the entity in preparing the fnancial statement. *valuating the auditor’s expert 6. $ssess the competence and ob%ectivity o the expert. 7. ,nderstand the feld o the expertise o the auditor’s expert. 8. *stablish the terms o the agreement with the expert. 9. *valuate the results o the wor' o the expert. #nternal auditing - is an appraisal activity established within an entity as a service to the entity.
+onsidering the wor' o internal auditor involves two phases /a'ing a preliminary assessment o internal auditing
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*xternal auditors must consider the internal auditor’s +ompetence - proessional )ualifcations and expertise :b%ectivity - organi"ational level to which the internal auditors report the results o their wor' ue proessional care - proper planning supervision and documentation o internal auditor’s wor' Scope o unction - nature and extent o the internal auditors’ assignment *valuating and testing the wor' o internal auditing &outine4/echanical audit procedures - is an acceptable practice that provided that the external auditor supervises and reviews wor' perorrmed by the internal auditors.