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Hi sir,
I have completed the chapter audit of receivables which explains substantive procedures.
I was able to understand evrything from OT Notes and lectures and the BPP text is little lenghty.
my first doubt that i read somewhere that according to assertions you need to answer in the exam .But in OT notes its not explained in that way and is it important to memmorise each assertions and test for that ? like iam not able to answer the questions easily compared to other topics such as internal contol , risk etc . and second one is ..what approach should I Adopt to study this audit procedure. ?
Hope you can asnwer my question .
Thanks in advance.Yes. When you audit a figure you have to collect evidence for every assertion it makes.
So, receivables are account balances so you must know the assertions relevant to those: existence, valuation, completeness etc.
It then depends a bit on the question. If it simply says describe four substantive tests you do not have to cover all assertions (you could have two for valuation, two for ownership/rights). However, when you describe the test you should say which assertipon it related to.
The tests are very open ended. So valuation: aged receivables analyses, see money received after year end, ask directors for their opinion on recoverability and cover that in the letter of representation (neither very strong evidence).
Ownership: inspect sales orders and invoices to see if the receivables seem real and owing to the company.
Completeness: reconcile control accounts, look at cash soming in after year end and trace back to a receivable existing at year end.
etc
ok so
in an exam question if they are asking to list any four procedure we can give any of the procedure but for scenario question it should be based on the scenario ryt ? so for scenario also OT note explanations can be written as answer ?
It should have better if in the OT notes it is explained for which asssertion is explanation given 🙂
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