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Im having a problem in providing answers in scenario based substantive procedure questions on depreciation, inventory, etc. any help?
The way I learn substantives is pretty good I will share it and see if it helps for you.
Let’s say your doing Receivables
Receivables is a SFP balance and the key assertions are Existence, valuation, Rights, and cut -off
Now all you gotta do is come up with 1 test for each assertion
So for example for existence
Circulate a letter to sample of receivables, with permission from client, asking them to confirm the balance owed to business?
Now this is only half coz I haven’t said why I’m doing it.So this will help to verify existence and valuation of receivables.
In your case, depreciation is an estimate.
Enquire of management as to how the deprecation was calculated to ensure its reasonable.
Recalculate the deprecation charge to ensure its accurate.
Hope these help
Best of luck tomorrow
Can I ask why is cut off an assertion relating to receivables? Doesn’t cut off relate to transactions and events?
Your right.
But your test could be something like this.
For a sample of invoices after year end, inspect GEN for date of despatch to ensure receivables are recorded in the right period. This will ensure that cut – has been done correctly.
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this is a great video you should watch https://www.youtube.com/watch?v=XzoKK3UcGr8&feature=relmfu
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