Questions on Assertions

Some tests will address more than one assertion, so you might as well list all those. For example, inspecting non-current assets confirms existence and, to some extent, valuation if the asset appears to be in a reasonable condition. Inspection would not normally tell you anything about ownership.

Completeness is the asseertion that all transactions and amounts have been cindluded in teh FS. For example, how do you know that all liabilities and accruals have been included? How do you know that all closing inventory has been included and that there isn’t a pile of it round the back to the factory that’s been forgotten about?

The auditor’s audit software has to be adapted to read each client’s files (eg the file layouts have to be specified so that the software ‘knows’ what it’s reading) and this can take some initial investment.

In subsequent years there should be a payback – unless the client alters their system.

You are correct about test data.

A test of control tests a CONTROL. For example, there could be a control to prevent goods being despatched to customers over their credit limit. If this control were being exercised by the computer, test data could be used to test it (eg set up a dummy customers account with a credit limit and see which orders are accepted/rejected).

An audit test is any type of test to do with the audit: could be a test of control or could be a substantive test. I don’t know what question you are referring to in the BPP answer, but if they are saying that the auditor would count some items then trace those to inventory sheets, that would be a substantive test. If the auditor inspected inventory sheets to see that they were signed by two counters, that would be a test of control.

Tracing transactions or reperforming counts is not an analytical procedure. Analytical procedures are comparing figures and rations one year to the next. In the context of inventory comparing this year’s inventory days to last years would be an analytical procedure.

It means that you are looking at an individual figure in the FS and considering or testing their appropriate assertions: does it exist (and what evidence?), is it complete (and what evidence?), what is its valuation (and what evidence?) etc.