Audit - Test of Controls

A/R Risk: Sales are invalid

Vouch sales to supporting shipping documents

A/R Risk: Sales are not complete

Obtain a sample of shipping documents and scan for missing numbers

A/R Risk: Sales are not authorized

Vouch sales prices to approved price lists

A/R Risk: Sales are not accurate

Perform recalculations on sales to verify accuracy

A/R Risk: Sales are not properly classified

Scan the GL to make sure all sales are actual sales

A/R Risk: Sales are not recorded in the proper period

Vouch sales to invoices to make sure invoice dates pertain to that period

A/P Risk: Purchases may be made for unauthorized purchases (objective: purchases are valid/real)

Review documents for evidence approval

A/P Risk: Invoices may not be recorded (objective: purchases are complete)

Examine supporting documentation for invoices. Reperform sequencing of prenumbered purchase orders. 

A/P Risk: Invoices may not be recorded accurately (objective: purchases are accurate)

• Inspect source documents for mathematical accuracy

• Confirm recording is correct

• Observe staff recording transactions

• Inquire with management about performance reviews

A/P Risk: Purchases may not be authorized (objective: purchases are authorized) 

Examine purchase orders for approval 

PPE Test of details TRANSACTIONS

• compare asset additions with supporting documentation (purchase contracts/agreements)

  • occurrence, accuracy, rights and obligations

• compare asset disposals with supporting documentation (sales invoices if sold) 

  • occurrence, accuracy, rights and obligations

• review repairs and maintenance, and rental expense. Inquire with management about their capitalization policy

  • completeness

PPE Test of details of BALANCES

• examine title documents and contracts for all additions in the year 

  • existence, accuracy, rights and obligations

• recalculate depreciation expense (using company’s policy)

  • is it reasonable, consistent, and accurate?

  • valuation

• inquire with management about PPE valuation

  • is PPE impaired or sold?

  • valuation