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Hi,
is the following correct in relation to substantive procedure for purchases?
Occurence
– For a sample of expenses in the purchase ledger, trace those to the invoices and other supporting documents such as GRNs.
– Trace a sample of GRNs to the purchase orders.Completeness
– Inspect unmatched GRNs file and seek explanation for any unmatched items and trace them to the year-end accruals.
-Performing analytical procedure by comparing previous year month-by-month level of expenses.Cut-off
-for a sample of GRNs dated shortly before and after year-end, agree that the amounts on the invoices are posted in the correct financial year.
-Obtain a schedule of accruals and inspect the date on the GRNs to make sure that they have been correctly accrued and that goods received after year end are not included.Thank you
Salvatore
Looks good.
It is also usual to trace some invoices outstanding at year end to payments made after year end and, vice versa, as additional tests on existence and completeness
Hi
It seems to me the assertions you are testing for payable is not quite relevant to the assertions for the balance sheet balances. I was taught that the relevant assertion tests for balance sheet balance should be rights and obligations,existence, completeness, allocation and valuation.
So, in what way do the suggestions not help with any of the assertions you have listed?
Hi Ken
What you have suggested was perfect.
What I meant was that Salvatore’s included occurrence and cut off in the substantive tests for balance account such as payable (creditors control account). These two assertion are actually related to transactions and events i.e.the P &L accounts?
I think I am a little bit confused with the term “test of purchase” from the thread. Are we trying to audit the creditors control account/Payables or are we trying to audit the purchase ledger?
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