- May 24, 2018 at 8:49 pm #453829alaccountancyMember
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I really struggle when a question asks for audit procedures instead of specifying whether tests of controls or substantive procedures are required.
For example, in Dinzee Co (December 2007) the question asks: ‘List SIX audit procedures an auditor would normally carry out on the purchases system at Dinzee Co, explaining the reason for each procedure.’
Sir, may I please ask a five part question, each part is related to audit procedures, so that I can try to make sense of the matter – if you wouldn’t mind answering the questions in turn, I would be very grateful because I am really struggling with this:
1. Are audit procedures about testing assertions or could it be both assertions and testing internal controls?
2. Aren’t audit procedures relating to a ‘system’ of some kind a test of control because we’re looking at the system rather than the financial statement balances and classes of transactions reported at the year-end?
3. Why is it in this question, the examiner expects the audit procedures to be linked to the assertions, when we’ve been asked about the purchases system?
4. When asked to provide ‘audit procedures’ are we being asked to provide a combination of tests of control and substantive procedures or to suggest a test of control and then explain how it could support the assertions of the financial statements or are both of the preceding interpretations, not the correct way to look at it?
5. If we’re asked to state and then explain, with an example, six audit procedures, relating to any class of transaction or account balance, must we go through: analytical procedures, enquiry, inspection, observation, recalculation and reperformance as distinct audit procedure categories or could we run through pragmatic audit procedures, to test assertions without explicitly categorising them under those broad categories?
Sorry sir, if I haven’t spotted any inconsistencies in my questions.
Thank you.May 24, 2018 at 9:50 pm #453835Ken GarrettKeymaster
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See the revision lecture and answer in Dinzee, here:
1 Audit procedures are ant tests the auditor carries out, both tests of control (ToC) and substantive tests.
2 If you are asked to test a system, this must mean an internal control system so ToCs appropriate.
3 I don’t think they should be
4 See our answer in the lecture
5 When performing substantive tests, it does not matter what type of tesr, but try to,cover the relevant assertions.
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