Listed below are auditing procedures that one might find in the audit program fo

Question

Listed below are auditing procedures that one might find in the audit program for a client. LIST OF AUDITING PROCEDURES FROM AUDIT PROGRAM (1)Determine if the cash balance is on deposit in the bank at year end. (2)Ask the credit department personnel about the policies for writing offuncollectible accounts (3)Observe the procedures for entering and processing inventory purchase transactions. (4) Send written requests to customers, asking them to reply directly to the auditors as to receivable whether or not the accounts receivable balances on the company's books are the correct amounts. (5)Recalculating the amounts shown as accumulated depreciation on property and equipment. (6) Inquiring about safeguards for the physical items of property and equipment. (7)Discussions with top management about granting credit for sales made on account. (8) Examine documents near the end of the year to determine whether some purchases on credit were omitted in determining the accounts payable balance REQUIRED: For each of the auditing procedures listed above, provide the following (b) (c) The financial statement assertion(s) that is (are) being audited. The type of audit evidence the auditor is obtaining. Whether the procedure is a test of controls or a substantive test.

Explanation / Answer

Ans 1) The balance sheet is being audited. The financial assertion in this case is that Balance sheets are susceptible to window-dressing before audits. The auditor is trying to find out if there is any window-dressing of the balance sheets at the end of the year. By checking the cash-balance deposited to the bank he is cross-checking the figures on the balance sheet. It is a substantive test.

Ans 2) Questionable accounts may sometimes be written off as invisibles or uncollectibles. The auditor is trying to ascertain how honestly accounting procedures are carried out in the organisation. It is a test of controls.

Ans 3) Accounting procedures particular to the organisation and conformance to GAAP (Generally Accepted Accounting Practices) are being audited. It is a test of control.

Ans 4) Profit and Loss statement (P& L) is being audited. Income and Expenditure columns are being tallied using actual evidence. It is a substantive test.

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