Audit Assertions.

(ECVRP) It is the primarily the responsibility of the entity’s management who makes
the following assertion:

Note: Management is in charge of the assertions while the auditor scrutinize the assertions presented.

EXISTENCE All reported assets, liabilities, and equity in the statement of financial
position exist or true.
COMPLETENESS All assets, liabilities and equity of the entity are to be included in the
statement of financial position.
VALUATION and ALLOCATION All assets, liabilities and equity in the statement of financial position are
stated in their appropriate amounts.
RIGHTS and OBLIGATION The entity has rights or control over all the reported assets, obligations
for liabilities at the reporting date.
PRESENTATION and All recorded assets, liabilities and equity are properly classified,
DISCLOSURE described, and disclosed in the Financial Statements, in accordance
with PFRS.

The following are audit procedures as to assertions relating to CASH until NON-CURRENT OPERATING ASSETS.

AUDITING PROCEDURES. (Put yourself in the point of view of the Auditor at all times)

To enhance your analysis, you need the question yourself the following in order
1. Does it exist? (Existence)
2. Is it completed? (Completeness)
3. Does it involve math? (Not all valuation and allocation involve math terms, it depends on the
purpose of the content) (Ex. Obtain a client a schedule, Compare general
ledger with subsidiary ledger)
4. Does the entity/management has control over it?
5. Lastly, is it properly classified? (Presentation and Disclosure)
Use elimination process carefully with faith that the answer is right.

CASH
Existence The auditor shall conduct a cash count. It must be conducted in the presence of the
cash custodian and must be present (cash custodian) throughout the count. Afterwards,
the auditor obtains signature of the cash custodian certifying that the cash was returned
intact.

The auditor inquiries from an official the existence of IOU’s as part of the items
counted.

The auditor must request bank confirmation of bank balance to all banks where the
client has accounts.

In cases, bank confirmation request does not agree with the company ledger, the auditor
shall obtain copies of the bank reconciliation prepared by the client.

Completeness The auditor use tests of controls of cash receipts

The auditor shall obtain copies of the bank reconciliation prepared by the client.

The auditor account for all check numbers of check issued.

 Valuation and The auditor conduct cash count
Allocation
The auditor must request bank confirmation of bank balance to all banks where
the client has accounts.

The auditor shall obtain copies of the bank reconciliation prepared by the client.

The auditor test the clerical accuracy of the reconciliation and the details of the
supporting schedules.

Rights and The auditor confirm Bank Balances

Obligations

Presentation and Review bank confirmation replies to identify cash balances held as compensating
Disclosure balances or lien for borrowings. (In this statement the Auditor wants to know the
classification of cash balances)

Lapping occurs when the details in the official receipts for cash collection from customers does not match
with the credit postings to the customers’ subsidiary ledgers. It refers to misappropriation of collections from
customers, delaying its recording and posting the subsequent collections to the account of the previously
paying customer. Lapping is most likely to occur when an employee receiving collections from customers has
access to the accounts receivable records.

Example: The cashier misappropriate* the collection of Customer A by posting to customer A the collection
from Customer B. Then the collection of Customer C is credited to the account of Customer B, and so on.
*means steal

If the client has at least two accounts with at least two separate banks, a bank transfer schedule shall be
prepared showing transfers of cash balances from one bank to another, especially towards the end of the
reporting period.

Kiting is an attempt to temporarily conceal a cash shortage at month end by issuing a check from one bank
and depositing it to another. The deposit reflected in the last account but the withdrawal may not be reflected
yet in the first bank account due to clearing cut-off.

Example: A fund transfer to Bank B at December 31 should be reflected to Bank A withdrawal account on the
same date. A fund transfer posted as deposit to Bank B without reflecting to Bank A disbursement from Bank A
may indicate that kiting may have occurred.

RECEIVABLE
Existence Vouching of recorded sales transaction back to customer order and shipping documents

Tracing subsequent cash receipts to determine that payments relate to the year accounts
receivable

Reviewing shipping documents

Completeness The auditor use tests of controls of cash receipts

The auditor performs sales cutoff test. Sales cutoff test is determine whether sales are
recorded in the proper period.

Reviewing shipping documents

 Valuation and Vouching of recorded sales transaction back to customer order and shipping documents
Allocation
Tracing subsequent cash receipts to determine that payments relate to the year accounts
receivable

The auditor perform cash receipts cut-off test. Cash receipts cut-off test is to determine
whether there is any adjustment in the original invoice price.

The auditor obtain a list of the accounts receivable from the subsidiary ledgers and
reconcile the total to the balance in the general ledger.

Examine large credit files for large accounts, review subsequent collections and perform
analytical procedures.

Review credit collection policies and procedures and measure expected credit losses.

Rights and The auditor reviewing the minutes of the meetings of the board of directors
Obligations
The auditor ask/inquiries the management.

Presentation and Compare the disclosures made in the financial statements with the requirements of the
Disclosure IFRS.

Obtain the confirmation of receivables pledged under loan agreements.

To establish correctness of the balance of the accounts receivable in the general ledger, it is necessary for the
auditor to obtain list of the accounts. As a standard audit procedure, Accounts receivable must be confirmed
with the debtors provides assurance that no lapping or any form of manipulation.

Positive Confirmation request the customer to reply/response whether or not the customer agrees with the
amount indicated in the confirmation request.

Negative Confirmation requests the debtor to reply only when the balance shown is incorrect

INVENTORIES
Existence The auditors observe the physical count conducted by the client’s personnel.
When to conduct if?
Perpetual Inventory system- Any time (roll forward procedures must be undertaken)
Physical Inventory system- At year end (reconcile the count and the ledger balance)

Tracing subsequent cash receipts to determine that payments relate to the year accounts
receivable

Reviewing shipping documents

Completeness The auditor conducts purchase cutoff test by reviewing purchase invoices

The auditor performs sales cutoff test. Sales cutoff test is determine whether sales are
recorded in the proper period.
 Confirming inventory balances stored in other locations

Valuation and The auditor conducts test of the accounting system.

A
The auditor
l perform test of prices, test of transactions, test of documents used in
physical
l inventory, test of reasonableness of inventory figures(analytical procedures).
o
c
The auditor
a obtain a list of the accounts receivable from the subsidiary ledgers and
t reconcile the total to the balance in the general ledger.
i
Comparison
o of the result of physical counts with the perpetual inventory records
n
Rights and The auditor reviewing supporting documents.
Obligations

Presentation and Disclose inventory costing formula, and any amount of the inventory pledged as
Disclosure liabilities, purchase commitments

INVESTMENTS
Existence The auditors confirms balances with the trustee of broker

Tracing subsequent cash receipts to determine that payments relate to the year accounts
receivable

Reviewing shipping documents

Completeness The auditor conducts cutoff test to obtain assurance that all investment transactions are
recorded in the proper period

The auditor performs sales cutoff test. Sales cutoff test is determine whether sales are
recorded in the proper period.

Confirming inventory balances stored in other locations

Valuation and The auditor conducts analytical review procedures

Allocation
The auditor conducts test of impairment, test of reasonableness

Validation by referring to published price quotations for securities that are measure at
fair value.

Rights and The auditor reviewing supporting documents.

Obligations

Presentation and The auditor should determine whether investments are properly classified and the
Disclosure disclosure guidelines in the accounting standards are observed in the financial statements.

Obtain an understanding of the management process for classifying securities

NON-CURRENT OPERATING ASSETS/PPE

Existence The Entity conducts physical verification while the auditor verify that physical
inspection is conducted by the employee with necessary qualifications.

Verifying evidence of ownership and contractual rights. (please look back on the PPE
report)

Completeness The auditor located unrecorded retirements of PPE and investment property.

Confirming inventory balances stored in other locations

Valuation and The auditor obtains from the client a schedule, which includes beginning balances,
Allocation additions, depreciation and amortization, disposals and ending balances.

Analytical procedures are performed.

The auditor review depreciation charges

Rights and The auditor examined invoices, deeds and title insurance policies.
Obligations

Presentation and The auditor review whether are assets are properly classified and presented in the SFP
Disclosure