General Sub Procedures

General Steps

1. In all situations, the ending balance must be

verifiable

• Cannot just “roll forward” balance – need to

build-up the ending balance

3. a rollforward of the beginning balance to

the ending balance is obtain, including:

– Additions, Disposals, Transfers

4. Activity for the year must be validated to underlying support which must be tested (esample or all items)

5. Assess if any changes should occur for prior year items

– such as disposed asset or change in useful life

Audit PPE

1. Purchases of PP&E [existence]

– For a sample, vouch to invoice or cost records

• determine sampling unit – per invoice or approved addition

– Inspect title

– Inspect board minutes for approval (for material acquisitions)

2. Expenditures subsequent to acquisition

– Such as repairs and maintenance —> Vouch to invoice and work descriptions

– Consider propriety of classification (expense or capitalize)

3. Disposal of PP&E

– Vouch to cash receipts journal and deposit slip

– Recalculate gain/loss

4. Determine procedures for unrecorded disposals [existence testing]

– Trace from BOD minutes to PP&E for disposals

– Consider if new assets are replacements

– Examine insurance policies, property tax records

– Physically inspect or confirm fixed assets

General PPE

1. Small number of transactions

• Relatively high dollar transactions

2. Authorization of Transactions (Board of Directors or approved capital budget) takes on added importance.

• Less concern for Access to Assets

• Some concern with Unrecorded Disposals

Auditing Liabilities

1. Accrued Liabilities

– Not normally invoiced/evidenced by the receipt of goods

– More difficult to detect unrecorded accruals

2. Agree balances to PY workpapers

3. Verify payments

4. Examine underlying agreements

5. Recalculate amounts

– Agree expense accounts to trial balance

6. Search for unrecorded accruals

– Review cash disbursements at year-end

7. Analytical procedures

Auditing Debt

1. Obtain a listing of all debt TB accounts

2. Determine which accounts to test (~all)

3. Determine if any debt was repaid in the current

year, validate repayment

4. Have client prepare debt confirmations and

auditor to mail.

5. Prepare an analytic for interest expense

6. Review compliance with debt covenants

Testing Revenue Balances - Basic

• Presumed fraud risk—significant risk

considerations (Tests of details likely)

– Fraud risk requires additional procedures

• Disaggregate revenue by class of transactions to

develop audit plan

Testing Revenue Balances-Steps

1. Obtain a listing of individual transactions for the

year

– Verify it is clerically accurate and reconciles to GL

2. For a sample of transactions vouch purchase order, invoice, and shipping documents (bill of lading) to the GL amounts

3. Cut-off testing – perform similar procedures as

above around year-end to validate transaction

recorded in proper period