Introduction%20to%20Actg%204P61

1
Introduction to Actg 4P61

• CAS 200 Overall objectives of the independent
  auditor, and the conduct of an audit in
  accordance with Canadian auditing standards
• CAS 300 Planning an audit of financial
  statements

2
Key Points

• Management assertions
• Management assertions give rise to Audit
  Objectives
• What type of tests?
• Thus have
• N.B. For each audit objective there must be an
  audit test

3
Management Assertions

• Transaction (Events)
• Occurrence
• Completeness
• Accuracy
• Cutoff
• Classification

4
Management Assertions

• Balances
• Existence
• Rights and Obligations (Ownership)
• Completeness
• Valuation and Allocation

5
Management Assertions

• Presentation and Disclosure
• Occurrence
• Rights and Obligations (Ownership)
• Completeness
• Valuation and Allocation
• Classification and Understandability

6
Transaction-Related Audit Objectives

• Specifically for transactions or events
• There are five audit objectives for transactions
• Occurrence
• Completeness
• Accuracy
• Posting and summarization
• Classification
• Timing (Cutoff)

7
Balance Related Audit Objectives

• To see if a balance is fairly stated
• Five objectives
• Existence
• Rights and Obligations (Ownership)
• Completeness
• Valuation
• Allocation

8
Presentation Disclosure Related Audit Objectives

• Used to examine financial statements
• Seven objectives
• Occurrence
• Rights and Obligations (Ownership)
• Completeness
• Accuracy
• Valuation
• Classification
• Understandability

9
Examples

• Asset Existence
• The test
• Inventory Completeness
• The test
• Sales Occurrence
• The test
• Sales timing
• The test

10
Problem 5-26, page 126

• The following are two balance-related audit
  objectives in the audit of accounts payable.
• All accounts payable included on the list
  represent amounts due to valid vendors.
• There are no unrecorded accounts payable.
• The list referred to in the objectives is the
  aged accounts payable balance produced using the
  supplier master file. The total of the list
  equals the accounts payable balance on the
  general ledger.
• REQUIRED
• Explain the difference between theses two
  balance-related audit objectives
• For the audit of accounts payable, which of these
  two balance-related audit objectives would
  usually be more important? Explain.

11
Problem 5-27, page 126

• The following (1 through 17) are the
  balance-related, transaction-related, and
  presentation- and disclosure-related audit
  objectives.

Assertions About Classes of Transactions and Events Assertions About Account Balances Assertions About Presentation and Disclosure
1. Occurrence 6. Existence 11. Occurrence and
7. Rights and Obligations 12. Rights and Obligations
2. Completeness 8. Completeness 13. Completeness
3. Accuracy 14. Accuracy and
9. Valuation and 15. Valuation
10. Allocation
4. Cutoff
5. Classification 16. Classification
17. Understandability
12
Problem 5-27, page 126 - continued

• REQUIRED
• Identify the audit object (1 through 17) of each
  of the following audit procedures for the audit
  of sales accounts receivable., and cash receipts
  for the current fiscal year.
• Examine a sample of duplicate sales invoices to
  determine whether each one has a shipping
  document attached.
• Add all customer balances in the accounts
  receivable trial balance and agree the account to
  the general ledger.
• For a sample of sales transactions selected from
  the sales journal, verify that the amount of the
  transaction has been recorded in the correct
  customer account in the accounts receivable total
  field of the customer master file.
• Inquire of the client whether any accounts
  receivable balances have been pledged as
  collateral on long-term debt and determine
  whether all required information is included in
  the footnote description for long-term debt.
• For a sample of shipping documents selected from
  shipping records, trace each shipping document to
  a transaction recorded in the sales journal.
• Discus with credit department personnel the
  likelihood of collection of all accounts with a
  balance greater then 100,000 and greater than 90
  days old as of the year-end.
• Examine sales invoices for the last five sales
  transactions recorded in the sales journal in the
  current year and examine shipping documents to
  determine that they are recorded in the correct
  period.
• For a sample of customer accounts receivable
  balances at the year-end, examine subsequent cash
  receipts in the following month to determine
  whether the customer paid the balance due.
• Determine whether all risks related to accounts
  receivable are adequately disclosed.
• Foot the sales journal for the month of July
  (hallway through the fiscal year and trace
  posting to the general ledger.
• Send letters to a sample of accounts receivable
  customers to verify whether they have an
  outstanding balance at the fiscal year-end.
• Determine whether long-term receivables and
  related party receivables are reported separately
  in the financial statements.