Author Archive for: Audit Lesson

I.TRANSACTIONS AND ACCOUNT BALANCE ASSERTION Transactions & Events: (IS) Occurrence Completeness Accuracy Cut-off Classification Account Balances Existence Rights & Obligations Completeness Valuation & Allocation   Completeness- all transactions, assets, liabilities and equity interests have been recorded that should have been recorded. Accuracy- amounts, data and other information have been recorded and disclosed appropriately. Cut-off- transactions and events have been recorded

I.AUDIT PROCEDURE Revenue is important to the audit because it’s one of the two major business processes, and purchasing is the other. Assertion Control objectives Audit Procedure Occurrence and existence To ensure that recorded sales transactions represent goods or services provided. For a sample of sales invoices ensure there is a related sales order form that has been authorised and

I.AUDIT PROCEDURE FOR ACCOUNT PAYABLE ASSERTIONS When testing accounts payable, assertions about purchases and cost of goods sold are also involved. Completeness Do the balances contain all transactions for the period? Reconcile accounts payable ledger with control account. Purchases cutoff test tests to determine if goods for which title has passed or not passed are appropriately accounted for.  FOB shipping

A number of sample selection methods are available to the auditor. I.Random selection Simple random sampling is a method of selection in which every item in population has the same statistical probability of being selected as every other item. This method of sampling ensures that all items within a population stand an equal chance of selection by the use of

I.AUDIT SAMPLING Definition Audit sampling as the application of audit procedures to less than 100% of the items (in population) with an account balance or class of transactions. Using Sampling in Auditing Sampling is normally appropriate for areas in which there are a high number of similar transactions e.g. credit sales for the period. It may not be cost

I.THE CONCEPT OF AUDIT EVIDENCE Audit evidence can be defined in simple terms as any piece of information which assists the auditor to reach conclusion on the truth and fairness of the financial statements. Audit evidence might therefore include such items as: Documents such as purchase orders, invoices, receipts, employee time sheets, customer orders, letters, bank statements, contracts and other

A risk assessment is carried out by auditor to identify financial statement areas susceptible to material misstatement and provides a basis for designing and performing further audit procedures. I. HOW TO IDENTIFY AUDIT RISKS A competent auditor needs to be able to identify those risks that may lead to a misstatement in the financial statements. If an auditor does not

I. ACCOUNTING DOCUMENT – Material Request – Purchase Request – Quotation – Purchase order – Sale order – Contract with supplier and customer – Delivery note – Goods received note – Invoice – Credit note – Debit note – Payment request – Official receipt – Payment voucher – Bank statement II. GENERAL AUDIT PROCEDURES FOR EXPENSES A financial audit

Audit procedures are carried out by the auditor in order to generate audit evidence. There are a number of audit testing procedures that may be available to the auditor. Whichprocedures are actually used will depend on the area that is being audited, and the evidence available to the auditor. I. INSPECTION This covers the physical review or examination of records,

Planning an audit involves more than just obtaining business understanding and performing risk assessment. I. PROCESS OF AUDIT PLANNING It includes following procedures 1. Knowledge and understanding of client’s business 2. Development of audit strategies or overall plan (who, when and how) 3. Preparation of audit programme II. WHY DO WE NEED AN UNDERSTANDING OF CLIENT’S BUSINESS? What Client’s business?