Accounts Payable:

Completeness Assertion
o Population- Vendors whom entity has previous done business with

Billing:

Completeness
o Goods shipped are properly billed Examine Shipping docs for
matching sales invoices
o Daily sales summaries are compared to daily postings to the A/R
Ledger ensures that all billed sales are recorded

Unrecorded Liabilities:

Vouch a sample of Cash disbursements recorded after year-end to receiving

reports & vendor invoices
Compare Cash payments occurring after the balance sheet date with the A/P
Trial Balance

Analytical Procedures performed as substantive tests, Based on

1. Availability
2. Reliability
3. Precision
..Of data used to develop expectations.
Payroll Transactions:

Occurrence Assertion
o Inquire & Observe segregation of duties for payroll disbursement
Extend substantive tests when overpayments are discovered
Substantive Procedure for Payroll compare payroll costs with entity
standards or budgets

Procedure to detect kiting Trace bank transfers for the last part of the audit
period and first part of the subsequent period
Procedure to detect lapping Compare dates checks are deposited per bank
statement with the dates remittance credits are recorded.
Inventory:

Existence
o Inventory at outside location (Significant) observe physical counts
o Inventory at outside location (insignificant) confirmation
o Inventory items in clients listing are valid(exist) vouch(trace) items
in listing schedule to inventory tags and the count sheet
Rights & Obligation
o Inventory at outside location Confirmation
Completeness
o Inventory at outside location Trace totals from inventory listing to
the G/L

Control Procedure: Receiving reports are prenumbered & periodically

reconciled
o All inventory on hand is reflected in the ending inventory balance
Valuation
o Inquiries of personnel regarding obsolete or slow-moving inventory
Classification & Understandability
o Confirm inventory pledged under loan agreements
o

Sales Transactions:

Completeness
o Inspect(Examine) prenumbered shipping docs that have not been
recorded in sales journal
Control: Billing dept matches prenumbered shipping docs with
entries in sales journal
o Invoice is prepared for each shipping document
o Detect understatement of sales trace transactions from shipping
documents to the sales invoices
o Performing cutoff procedures for shipping and receiving
Allocation & Valuation
o Auditor selects a sample of sales transactions & examines evidence of
credit approval

Accounts Receivable Turnover:

Sales / Avg net Receivables

If decreased in current year could be due to improper cutoff of sales @
year end

Long-Term Debt:

Auditor would correlate interest expense recorded for the period with
outstanding debt
o Provides evidence regarding reasonableness of interest expense
balance

Unrecorded Retirements of Fixed Assets:

Inspect property ledger, & the insurance/tax record then tour the clients
facilities
Vouch a sample of assets on ledger to those on hand in clients facility

Fixed asset additions:

Inspect documents & physically examine assets

Investments:

Understandability & Classification + Valuation & Accuracy

Scan investment records for periods just before & just after year-end to
determine that any transfers between categories of investments have
been properly recorded
Existence
o Inspect securities or confirm the number of shares owned that are held
by an independent custodian
o

Intangible Assets:

Valuation & Allocation

o Review or recompute amortization/depreciation & determine if
reasonable

Stock Options:

Granting of stock options trace transactions to approval by the BOD

Equity:

Classification & Understandability

o Auditor determines whether there are restrictions on retained earnings
resulting from loans, agreements, or state laws.

P, P & E:

Existence
o Obtain a listing of all current-year additions, vouching significant
additions to original invoices, and determining that they have been
placed in service