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Examples of Assertions

The document outlines the relationships among general and specific audit objectives, risks of material misstatement, and example audit procedures for accounts receivable. It emphasizes the importance of verifying the existence, rights, completeness, cutoff, valuation, and presentation of assets in financial statements. Additionally, it highlights the need for timely audits to enhance the value of financial statements post year-end.

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Ziad Mohammed
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7 views1 page

Examples of Assertions

The document outlines the relationships among general and specific audit objectives, risks of material misstatement, and example audit procedures for accounts receivable. It emphasizes the importance of verifying the existence, rights, completeness, cutoff, valuation, and presentation of assets in financial statements. Additionally, it highlights the need for timely audits to enhance the value of financial statements post year-end.

Uploaded by

Ziad Mohammed
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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246 Chapter Six

FIGURE 6.8 Relationships among Audit Objectives, Risks of Material Misstatement, and Audit Procedures
General Audit Specific Audit Risks of Material
Objectives for Objectives for Misstatement: “What
Assets Accounts Receivable Can Go Wrong” Example Audit Procedures

Existence of assets All recorded receivables Receivables may have been Confirm a sample of
exist. recorded that do not exist. receivables by direct
communication with
debtors.
Management may have Inspect monthly adjusting
fraudulently overstated entries for suspicious
revenue and receivables items.
by making inappropriate
adjusting journal entries.

Rights to assets The client has rights to the Accounting personnel may Inspect confirmations of
receivables. erroneously treat a sale of liabilities to determine if
receivables as a liability. receivables have been
sold or factored.

Completeness of assets All receivables are Management may have Select a sample of shipping
­recorded. shipped items but not documents and trace
recorded the sales. them to the sales invoices
and recorded sales
entries.

Cutoff of transactions Sales transactions are Sales and receivables for Vouch sales journal entries
recorded in the proper the next period may be shortly before year-end to
period. recorded in the current the shipping documents.
period.

Valuation of assets Receivables are presented Allowance for uncollectible Investigate the credit ratings
at net realizable value. accounts may be for delinquent and large
misestimated by receivables.
management.
Allowance for sales returns Compare the amount of
and allowances may credits given to customers
be misestimated by in the subsequent period
management. to the amount estimated
by management.
Software routine to develop Obtain an aged trial balance
aged trial balance of of receivables, test its
receivables may have clerical accuracy, and
been erroneously reconcile to the ledgers.
programmed.

Financial statement Receivables are properly Accounting personnel may Provide a list of related
­presentation of assets presented in the balance have failed to identify parties to all members of
sheet, with appropriate related party transactions. the audit team to assist
disclosures. in identification of the
transactions.

be tailored to each client’s risks and internal control. The audit procedures in audit plans
may vary substantially from one engagement to the next.

Timing of Audit The value of audited financial statements is enhanced if the statements are available on
Work a timely basis after the year-end. To facilitate a timely release of the audit report, audi-
tors normally begin the audit well before the balance sheet date. The period before the

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