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ISAs 330 Auditors response to assessed risk requires the auditor to carry out 3 major minimum substantial procedure
1) Agreeing the FS to the accounting records
2) Examination of materials Journals
3) Examining the adjustments made in preparing the financial reports(FS).
Please , what exactly does ISAs 330 means by material journals examinations ?
Thank you sir .
I don’t see this in ISA 330 as you state it – nor do I think it is in our notes. If you look at ISA 330 (just browse the internet and you’ll find it) it says:
“20. The auditor’s substantive procedures shall include the following audit procedures
related to the FINANCIAL STATEMENT CLOSING PROCESS:
(a) Agreeing or reconciling information in the financial statements with the underlying
accounting records, including agreeing or reconciling information in disclosures, whether such information is obtained from within or outside of the general and subsidiary ledgers; and
(b) Examining material journal entries and other adjustments made during the course of preparing the financial statements.”So this gives context – we are talking about substanTIVE (not substantial) procedures at the closing stage of the audit. You should know from FA/F3 that the journal is a book a prime entry used to record “unusual” transactions – including all the closing adjustments – depreciation/accruals/prepayments/bad debt write-off, etc, etc. It is also used record correction of errors.
Sir , thank you. However, I mean substantive not substantial ( error from me) . I knew what journal is but I was confused how ISAs 330( Kaplan ) meant in the context of Auditing material journals ! Because the 3rd option talked about same thing ! I think I have to stop using Kaplan materials bcos it’s errors are becoming too much.
Once again thanks .
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