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    CH 13 Updated

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    Rayhan
    The document outlines substantive procedures for auditing key financial statement figures, including non-current assets, intangible assets, inventory, receivables, bank balances, payables, and long-term liabilities. For each item, it identifies major risks of misstatement, sources of evidence, and procedures such as confirmation, inspection, and valuation. The goals are to confirm ownership and valuation of assets, ensure completeness and accuracy of liabilities, and verify account balances directly with third parties where possible.

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    © All Rights Reserved
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    CH 13 Updated

    Uploaded by

    Rayhan
    24 views14 pages
    The document outlines substantive procedures for auditing key financial statement figures, including non-current assets, intangible assets, inventory, receivables, bank balances, payables, and long-term liabilities. For each item, it identifies major risks of misstatement, sources of evidence, and procedures such as confirmation, inspection, and valuation. The goals are to confirm ownership and valuation of assets, ensure completeness and accuracy of liabilities, and verify account balances directly with third parties where possible.

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    _Ch 13 Updated__

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    The document outlines substantive procedures for auditing key financial statement figures, including non-current assets, intangible assets, inventory, receivables, bank balances, payables, and long-term liabilities. For each item, it identifies major risks of misstatement, sources of evidence, and procedures such as confirmation, inspection, and valuation. The goals are to confirm ownership and valuation of assets, ensure completeness and accuracy of liabilities, and verify account balances directly with third parties where possible.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    24 views14 pages

    CH 13 Updated

    Uploaded by

    Rayhan
    The document outlines substantive procedures for auditing key financial statement figures, including non-current assets, intangible assets, inventory, receivables, bank balances, payables, and long-term liabilities. For each item, it identifies major risks of misstatement, sources of evidence, and procedures such as confirmation, inspection, and valuation. The goals are to confirm ownership and valuation of assets, ensure completeness and accuracy of liabilities, and verify account balances directly with third parties where possible.

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    © All Rights Reserved
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    Download as pptx, pdf, or txt
    of 14

    SUBSTANTIVE PROCEDURES

    – KEY FINANCIAL
    STATEMENT FIGURES

    Prepared By: Naima Sultana ACA


    Deputy Director (Audit & consultancy)
    ACNABIN Chartered Accountants
    1. NON-CURRENT ASSETS
    CONFIRMATION OF OWNERSHIP (RIGHTS AND
    OBLIGATIONS)
    INSPECTION OF NON-CURRENT ASSETS (EXISTENCE
    AND VALUATION)
    VALUATION, PREFERABLY BY THIRD PARTIES
    (VALUATION)
    ADEQUACY OF DEPRECIATION RATES (VALUATION)

    Naima Sultana ACA


    THE MAJOR RISKS OF THE TANGIBLE NON-CURRENT ASSET
    BALANCES
     THE COMPANY NOT ACTUALLY OWNING THE ASSETS (RIGHTS AND
    OBLIGATIONS ASSERTION)
     THE ASSETS NOT ACTUALLY EXISTING OR HAVING BEEN SOLD BY
    THE COMPANY (EXISTENCE ASSERTION)
     OMISSION OF ASSETS OWNED BY THE COMPANY (COMPLETENESS
    ASSERTION)
     THE ASSETS BEING OVERVALUED, EITHER BY INFLATING COST OR
    VALUATION, OR BY UNDERCHARGING DEPRECIATION (VALUATION
    ASSERTION)
     THE ASSETS BEING UNDERVALUED, BY NOT INCLUDING AN
    APPROPRIATE REVALUATION IN A POLICY OF REVALUATION OR BY
    OVERCHARGING DEPRECIATION (VALUATION ASSERTION)
     THE ASSETS BEING INCORRECTLY PRESENTED IN THENaima Sultana ACA
    FINANCIAL
    SOURCES OF EVIDENCE
     THE NON-CURRENT ASSET REGISTER (INDICATES OWNERSHIP)
     PURCHASE INVOICES FOR ASSETS PURCHASED WITHIN THE YEAR
     SALES INVOICES FOR ASSETS SOLD WITHIN THE YEAR
     REGISTRATION DOCUMENTS OR OTHER DOCUMENTS OF TITLE
    SUCH AS TITLE DEEDS FOR PROPERTY
     VALUATIONS CARRIED OUT BY EMPLOYEES OR THIRD PARTY
    VALUERS
     LEASES OR HIRE PURCHASE DOCUMENTATION IN RESPECT OF
    ASSETS
     PHYSICAL INSPECTION OF THE ASSETS THEMSELVES BY THE
    AUDITOR
     DEPRECIATION RECORDS OR CALCULATIONS (THESE ARE OFTEN
    KEPT WITH THE ASSET REGISTER)
    Naima Sultana ACA
    2. INTANGIBLE NON-CURRENT ASSETS
    CONFIRMATION THAT 'ASSETS' EXIST
    CONFIRMATION OF APPROPRIATE VALUATION
    MAJOR RISKS OF MISSTATEMENT OF THE INTANGIBLES
     EXPENSES BEING CAPITALIZED AS NON-CURRENT ASSETS
    INAPPROPRIATELY (EXISTENCE ASSERTION)
     INTANGIBLE ASSETS BEING CARRIED AT THE WRONG COST OR
    VALUATION DUE TO INFLATING THE COST OR VALUATION
    (VALUATION ASSERTION)
     INTANGIBLE ASSETS BEING CARRIED AT THE WRONG COST OR
    VALUATION DUE TO CHARGING INAPPROPRIATE AMORTIZATION,
    WRONGLY AMORTIZING OR NOT AMORTIZING (VALUATION
    ASSERTION)
     INTANGIBLE ASSETS BEING CARRIED AT THE WRONG COST OR
    Naima
    VALUATION DUE TO IMPAIRMENT REVIEWS NOT BEING Sultana ACA
    CARRIED
    SOURCES OF INFORMATION
    ACCOUNTING STANDARDS/AUDITOR'S KNOWLEDGE OF
    ACCOUNTING STANDARDS FOR WHAT CONSTITUTES AN
    INTANGIBLE ASSET
    PURCHASE INVOICES OR DOCUMENTATION
    CLIENT CALCULATIONS AND SCHEDULES
    SPECIALIST VALUATIONS
    AUDITOR UNDERSTANDING OF THE ENTITY FOR SIGNS
    OF IMPAIRMENT FACTORS

    Naima Sultana ACA


    3. INVENTORY
    ATTENDING AN INVENTORY COUNT (EXISTENCE)
    VALUATION AT THE LOWER OF COST AND NET
    REALIZABLE VALUE (VALUATION)
    IN SOME CASES, CONFIRMATION OF OWNERSHIP
    (RIGHTS AND OBLIGATIONS)

    Naima Sultana ACA


    MAJOR RISKS OF MISSTATEMENT OF THE INVENTORY BALANCE
     INVENTORY THAT DOES NOT EXIST BEING INCLUDED IN THE
    FINANCIAL STATEMENTS (EXISTENCE)
     NOT ALL INVENTORY THAT EXISTS BEING INCLUDED IN THE
    FINANCIAL STATEMENTS (COMPLETENESS)
     INVENTORY BEING INCLUDED IN THE FINANCIAL STATEMENTS AT
    FULL VALUE WHEN IT IS OBSOLETE OR DAMAGED (VALUATION)
     INVENTORY BEING INCLUDED IN THE FINANCIAL STATEMENTS AT
    THE WRONG VALUE, WHETHER DUE TO MISCALCULATION OF COST
    OR THE FACT THAT COST HAS BEEN USED ALTHOUGH NET
    REALIZABLE VALUE IS LOWER THAN COST (VALUATION)
     INVENTORY THAT ACTUALLY BELONGS TO THIRD PARTIES BEING
    INCLUDED IN THE FINANCIAL STATEMENTS (RIGHTS AND
    OBLIGATIONS)
     INVENTORY WHICH HAS ACTUALLY BEEN SOLD IS INCLUDED IN
    Naima Sultana ACA
    THE FINANCIAL STATEMENTS (CUT-OFF)
    SOURCES OF INFORMATION
     THE COMPANY'S CONTROLS OVER INVENTORY COUNTING
     THE AUDITORS' ATTENDANCE AT THE ANNUAL INVENTORY COUNT
     CONFIRMATIONS WITH THIRD PARTIES HOLDING INVENTORY OR
    HAVING INVENTORY STORED FOR THEM BY THE COMPANY
     PURCHASE INVOICES FOR INVENTORY
     WORK-IN-PROGRESS RECORDS FOR INVENTORY
     POST-YEAR-END SALES INVOICES FOR INVENTORY
     POST-YEAR-END PRICE LISTS FOR INVENTORY
     POST-YEAR-END SALES ORDERS

    Naima Sultana ACA


    4. RECEIVABLES
     CONFIRMING DEBT OWED BY CUSTOMERS WITH CUSTOMERS (EXISTENCE,
    RIGHTS AND OBLIGATIONS, VALUATION) –
     CONFIRMING DEBT IS STILL LIKELY TO BE COLLECTED (VALUATION)

    THE MAJOR RISKS OF MISSTATEMENT OF THE RECEIVABLE BALANCES

     DEBTS BEING UNCOLLECTIBLE (VALUATION)


     DEBTS BEING CONTESTED BY CUSTOMERS (EXISTENCE, RIGHTS AND
    OBLIGATIONS)

    THE FOLLOWING SOURCES OF INFORMATION CAN BE USED


     RECEIVABLES LEDGER INFORMATION
     CONFIRMATIONS FROM CUSTOMERS
     CASH PAYMENTS RECEIVED AFTER THE YEAR END

    Naima Sultana ACA


    5. BANK
     CONFIRMING BANK BALANCES DIRECTLY WITH THE BANK (EXISTENCE,
    VALUATION, RIGHTS AND OBLIGATIONS)
     CONFIRMING RECONCILING DIFFERENCES CALCULATED BY THE CLIENT
    ARE REASONABLE (COMPLETENESS, VALUATION)
     CONFIRMING ANY MATERIAL CASH BALANCES HELD AT THE CLIENT ARE
    CORRECTLY STATED (VALUATION)
    THE MAJOR RISKS OF MISSTATEMENT OF THE BANK AND CASH
    BALANCES
     NOT ALL BANK BALANCES OWNED BY THE CLIENT BEING DISCLOSED
    (RIGHTS AND OBLIGATIONS/EXISTENCE)
     RECONCILIATION DIFFERENCES BETWEEN BANK BALANCE AND CASH
    BOOK BALANCE BEING MISSTATED (VALUATION)
     MATERIAL CASH FLOATS BEING OMITTED OR MISSTATED
    (COMPLETENESS/EXISTENCE)
    THE FOLLOWING SOURCES OF INFORMATION CAN BE USED
     CASH BOOK
     CONFIRMATION FROM THE BANK
    6. PAYABLES
     ENSURING THAT ALL LIABILITIES ARE INCLUDED (COMPLETENESS)
     CONFIRMING THAT ALL LIABILITIES ARE BONA FIDE OWED BY THE
    COMPANY (RIGHTS AND OBLIGATIONS)

    THE MAJOR RISKS OF MISSTATEMENT OF THE PAYABLE BALANCES


     THE ENTITY UNDERSTATING ITS LIABILITIES IN THE FINANCIAL
    STATEMENTS (COMPLETENESS)
     CUT-OFF BETWEEN GOODS INWARD AND LIABILITY RECORDING BEING
    INCORRECT (CUT-OFF)
     (MORE RARELY) NON-EXISTENT LIABILITIES BEING DECLARED
    (EXISTENCE, RIGHTS AND OBLIGATIONS)
    THE FOLLOWING SOURCES OF INFORMATION CAN BE USED
     PAYABLES LEDGER RECORDS
     CONFIRMATIONS FROM SUPPLIERS

    Naima Sultana ACA


    7. LONG-TERM LIABILITIES
     RISKS INCLUDE FAILURE TO MAKE CORRECT DISCLOSURES AND
    MISCALCULATION OF INTEREST.
     THERE SHOULD BE THIRD PARTY EVIDENCE FROM LENDER.

    THE MAJOR RISKS OF MISSTATEMENT OF THE LONG TERM LIABILITIES


     THAT NOT ALL LONG-TERM LIABILITIES HAVE BEEN DISCLOSED
    (COMPLETENESS)
     THAT INTEREST PAYABLE HAS NOT BEEN CALCULATED CORRECTLY AND
    INCLUDED IN THE CORRECT ACCOUNTING PERIOD (ACCURACY AND CUT-
    OFF)
     THAT DISCLOSURE IS INCORRECT (PRESENTATION AND DISCLOSURE)

    THE FOLLOWING SOURCES OF INFORMATION CAN BE USED


     SCHEDULE OF LOANS/PRIOR YEAR AUDIT FILE INFORMATION
     STATUTORY BOOKS, SUCH AS REGISTER OF DEBENTURES, ARTICLES OF
    ASSOCIATION
     LOAN AGREEMENTS
     BANK LETTER AND DIRECT CONFIRMATIONS FROM OTHER LENDERS
     CASH BOOK  BOARD MINUTES
    THANK YOU

    Naima Sultana ACA

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