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For substaintive procedure:
Reconcile a sample of payable balances with supplier statement and investigate the difference which could indicate a significant misstatement.
-Reconcile a sample of supplier statement with payable balance.
Are they both the same thing?
For payable it’s understatement so is that existence or completeness?Yes they look like the same thing.
TIP: an actual transaction must be captured -> recorded. … -> reach the financial statements. Under / overstatement means the amount in the FS is less / more than it should be. It will be less if $s are omitted – i.e. incomplete.
Overstatement means there are $s in the FS that shouldn’t be – e.g. because a recorded asset does not exist.Thanks!
In payable, AP – Obtain a supplier statement and reconcile these to payable balances means it will verify completeness? right?
But if we reconcile trade payable balances with supplier statement it means it verify the existence? right?To reconcile A to B is the same as to reconcile B to A. It tests for cutoff as well as completeness e.g. goods invoiced may validly be omitted if not received in inventory. It also tests existence. If you had $10k ledger balance agreeing to a $10k statement you’d be happy that the liability exists. It’s just that the greater risk for liabilities is understatement / omission rather than overstatement.
Thanks for explaining! I still have a doubt on existence, as per directional testing when we match source document to FS it verify the completeness and when we match FS to our source document it verifies existence? No?
For example: Matching Bank statement to FS verifies completeness
& Matching FS to bank statement verify occurrence/existence?
Am i right?
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