Substantive Testing

III. Substantive Testing of Balances and Analytical Procedures 1. Substantive Testing of Cash I.

Assertions Existence or Occurrence

Audit Objectives A.  To determine whether cash exists at day-end and cash-related transactions occur within the day. B.  To determine that all cash balances of  the client are reflected on the balance sheet at day-end. C.  To determine whether all cash transactions are recorded in the proper accounting period.

II.

Completeness

III.

Valuation or Allocation

D.  To determine if  cash is recorded and presented at the proper amount.

IV.

Presentation and Disclosure

E.  To determine whether cash is presented in accordance with GAAP.

Audit Procedures 1. Obtain analysis of  cash balance and reconcile to the general ledger. 2. Confirm cash balances as of  balance sheet date. 3. Perform cash count procedures for cash on hand.

4. Prepare proof of  cash and reconcile cash transaction occurring during a specified period as they are recorded by the client. 5. Verify the client’s cut-off of cash receipts and cash disbursements. 6. Verify cash on hand under receivership.  This is in addition addition to the foregoing procedures which will enable the auditor to verify  proper valuation of  cash. 7. Investigate any  voucher representing large or unusual payments to related parties. 8. Evaluate proper financial statements presentation and disclosure of cash.

2. Substantive Testing of Sales I. II.

III.

Assertions Existence or Occurrence Rights and Obligations. Completeness

Audit Objectives

A.  To determine that all transactions relative to sales have been recorded in the proper accounting period.

Audit Procedures 1. Perform analytical procedures to determine whether recorded sales appear reasonable. 2.  Test cut-off of sales which are recorded in the proper accounting period.

3. Substantive Testing of Cost of Goods Sold I.

II.

Assertions Existence or Occurrence

Completeness

Audit Objectives A.  To determine whether inventories exist at day-end and represent items held for sale in the ordinary course of  business. B. 1.  To determine whether all transactions related to inventory are recorded in the proper accounting period. 2.  To determine that inventory  listings are accurately  compiled and inventory  quantities include all items on hand.

Audit Procedures 1. Obtain listings of  inventory and reconcile to ledgers. 2. Observe the taking of  physical inventory  and conduct test counts. 3. Obtain a final inventory from the client. A.  Trace test counts made during the inventory  observation into inventory  listing. B.  Test the clerical accuracy of  the final inventory  listing. 4. Review the dayend cut-off of  purchases and sales transactions. 5.  Test numerical sequence of  inventory 

III.

Valuation or Alocation

C.  To determine whether the inventories are properly stated with respect to Cost determine by  an acceptable method consistently  applied. D.  To determine that the inventories and cost of goods sold are presented and classified in the financial statements in accordance with PAS or PFRS. 

IV.

Presentation and Disclosure

purchase requisition. 6. Review entries to cost of goods sold. 7. Perform analytical review related to inventories and cost of goods sold. 8. Evaluate the basis and methods of  inventory pricing. 9. Vouch and test inventory pricing. 10.Check inventory  for quality and/ or obsolescence.

11.Determine the existence of  inventory. 12.Evaluate financial statement presentation of  inventories and cost of goods sold including adequacy of  disclosure.

4. Substantive Testing of Prepaid Expenses (Supplies) Assertions

Audit Objectives 1.  To ascertain the correctness of  prepaid or deferred amount at the end of the period as well as the amounts consume or had expired, if any, during the period under review.

Audit Procedures A. Vouch purchases of  supplies on a test basis. B. Conduct physical count of supplies inventory on a test basis.