Modern Auditing:

Assurance Services and the Integrity

of Financial Reporting, 8
th
Edition
William C. Boynton
California Polytechnic State
University at San Luis Obispo
Raymond N. Johnson
Portland State University
Chapter 17 Auditing the Investing and Financing Cycles
Chapter Overview
Nature of the Investing and
Financing Cycles
Overview of the Cycles
Investing Activities

Financing Activities


Understanding the Entity and
Environment
Understanding the Entity and
Environment
Investing Cycle Audit
Objectives
Investing Cycle Analytical
Procedures
Investing Cycle
Inherent Risk


Consideration of Internal Controls


Preliminary Audit Strategies
Substantive Tests for Plant
Assets
Initial Procedures

Analytical Procedures

Tests of Details of Transactions
Vouch Plant Asset Additions
Vouch Plant Asset Disposals
Review Entries to Repairs and
Maintenance Expense
Substantive Tests for Plant
Assets
Tests of Details of Balances
Inspect Plant Assets
Examine Title Documents and Contracts

Tests of Details of Accounting
Estimates
Review Provisions for Depreciation
Impairment of Plant Assets
Tests of Details of Presentation and
Disclosure
Financing Cycle
Financing Cycle Audit
Objectives
Financing Cycle Analytical
Procedures
Financing Cycle
Inherent Risk


Consideration of Internal Control


Common Documents and Records
Financing Cycle Functions and
Related Controls
Authorizing bonds and capital stock

Issuing bonds and capital stock

Paying bond interest and cash dividends

Redeeming and reacquiring bonds and
capital stock

Recording financing transactions
Preliminary Audit Strategies for
Long-Term Debt
Substantive Tests of Long-Term
Debt
Initial Procedures


Analytical Procedures


Tests of Details of Transactions

Substantive Tests of Long-Term
Debt
Tests of Details of Balances
Review Authorizations and Contracts
Confirm Debt
Recalculate Interest Expense


Tests of Details of Presentation and
Disclosure
Preliminary Audit Strategies for
Shareholders Equity
Substantive Tests of
Stockholders Equity
Initial Procedures

Analytical Procedures

Tests of Details of Transactions
Vouch Entries to Paid-in Capital
Accounts
Vouch Entries to Retained Earnings
Analytical Procedures
Substantive Tests of
Stockholders Equity
Tests of Details of Balances
Review Articles of Incorporation and Bylaws
Review Authorization and Terms of Stock
Issues
Confirm Shares Outstanding with Registrar
and Transfer Agent
Inspect Stock Certificate Book
Inspect Certificates of Shares Held in
Treasury

Tests of Details of Presentation and
Disclosure