Auditoría de Activos - FINAL ESTEEE

Fundamental Concepts, Content, and Financial Reporting Standards (NIF) for Asset Rubrics

Efectivo (Cash) represents the monetary resources available immediately for the entity to fulfill its obligations and carry out operations. According to the NIF C-1 standard, the accounts involved are Caja and Bancos. A practical example includes an entity possessing $20,000$ in Cash and $283,735$ in Banks. Cuentas por cobrar (Accounts Receivable) are the exigible rights of the entity to receive cash or other goods derived from credit sales or similar operations. Governed by NIF C-3, these include Clientes, Documentos por cobrar, and Deudores diversos. An example is a balance of $1,875,500$ presented in the Customers account.

Pagos anticipados (Prepaid Expenses) are amounts paid in advance for goods or services to be received in the future. Regulated by NIF C-5, examples include prepaid insurance, rents, and advertising. A practical scenario is the payment of $12,000$ for an annual insurance policy covering the entire year. Inventarios (Inventories) are goods owned by the entity intended for sale or for the production of goods to be sold. Under NIF C-4, this includes Materia prima (Raw materials), Producción en proceso (Work in progress), and Productos terminados (Finished goods). An example is an inventory valued at $500,000$ in the finished goods warehouse.

Propiedad, planta y equipo (Property, Plant, and Equipment) are tangible assets used in business operations with a useful life exceeding one year ($1$). Regulated by NIF C-6, this rubric covers Land, Buildings, Machinery, Transport Equipment, and Furniture. For instance, a company might hold office equipment valued at $200,000$. Cargos diferidos (Deferred Charges), currently considered under other assets or amortizable expenses, are expenditures that will generate economic benefits in several future periods. NIF C-8 for Intangible Assets applies here, such as organization expenses totaling $150,000$.

Audit Objectives and Examples by Asset Rubric

For Efectivo, the objective is to verify the physical existence and availability of cash, ensuring it is correctly registered in the accounting books. This is applied through physical cash counts (arqueos de caja) and the review of bank reconciliations. In Cuentas por cobrar, the auditor aims to prove that the collection rights are real, recoverable, and correctly valued. This involves selectively sending confirmations to clients to recognize their debts, such as the $1,875,500$ balance.

In the case of Pagos anticipados, the audit objective is to verify that the prepaid payments represent future benefits and are correctly amortized. This involves recalculating amounts, such as the $12,000$ prepaid insurance. For Inventarios, the goal is to confirm physical existence, ownership, and correct valuation. This is performed through the observation of physical inventory valued at $500,000$. For Propiedad, planta y equipo, auditors verify that assets exist, belong to the company, and follow NIF valuation standards. This includes physical inspection of items like furniture registered at $20,000$ and their purchase invoices. Finally, for Cargos diferidos, auditors confirm that these represent future benefit expenses and are correctly amortized over the corresponding period, such as the $150,000$ in organization expenses.

Audit Risks: Inherently, Control, and Detection

Efectivo carries a high inherent risk of theft or fraud due to the nature of liquid money. Control risks include a lack of segregation of duties between those who receive, record, and deposit cash. Detection risk occurs if the auditor fails to perform cash counts or review bank reconciliations properly. Cuentas por cobrar inherent risks include the possibility of recording fictitious sales or uncollectible clients. Control risks involve a lack of credit authorization or aging analysis, while detection risks include failing to confirm balances with clients.

Pagos anticipados inherent risk involves recording current expenses as assets. Control risks stem from a lack of amortization controls, while detection risk involves the auditor failing to inspect contracts or amortization calculations. Inventarios inherent risks include losses, theft, obsolescence, or overvaluation. Control risks involves deficiencies in warehouse controls or records of entries and exits. Detection risk occurs if the auditor does not observe the physical inventory or perform selective tests.

Propiedad, planta y equipo inherent risk involves registering non-existent assets or incorrect valuations. Control risks include a lack of adequate asset records or physical counts. Detection risk exists if the auditor fails to inspect assets or purchase documentation. Cargos diferidos inherent risk involves capitalizing expenses that will not generate future benefits. Control risks follow from poor amortization oversight, and detection risk occurs if the auditor does not review amortization criteria or support documentation.

Methods of Internal Control Evaluation

Internal control evaluation uses three primary methods: the Questionnaire method, the Graphic (flowchart) method, and the Descriptive method. For Efectivo, the flow involves Collection → Accounting Registry → Deposit → Reconciliation; the control attribute is custody and accounting registry. For Cuentas por cobrar, the process is Sale → Invoicing → Registry → Collection, focusing on credit authorization and follow-up. Pagos anticipados follows Payment → Registry → Control → Amortization, ensuring the expense is applied gradually.

Inventarios follow Purchase → Reception → Registry → Sale, focusing on the authorization of entries and exits monitored by the warehouse and accounting. Propiedad, planta y equipo follow Purchase → Registry → Use → Depreciation, ensuring assets are registered with invoices and depreciated periodically. Cargos diferidos follow Registry → Accounting Control → Amortization, ensuring the authorization and registry of amortization to expenses occur during benefit periods.

Analytical Procedures and Substantive Testing

Analytical procedures involve comparing information with a similar industry, comparing with previous periods, analyzing financial ratios (such as liquidity, A/R turnover, and inventory days), and investigating unusual variations. For instance, in Efectivo, one compares cash levels against industry averages or checks for unusual fluctuations in Bank accounts. In Cuentas por cobrar, the auditor analyzes changes in balances and reviews overdue accounts.

Substantive tests focus on assertions or affirmations. Representative tests include: performing cash counts (arqueos) for Efectivo; sending external confirmations to verify A/R balances; inspecting insurance policies and recalculating monthly amortization for Pagos anticipados; physical observation of Inventarios; and inspecting physical assets and recalculating depreciation for Propiedad, planta y equipo. For Cargos diferidos, the auditor inspects supporting documents and recalculates amortization to ensure future benefits.

External Confirmations and NIA 505

According to NIA 505, external confirmation is audit evidence obtained through a direct written response from a third party (the confirming party) to the auditor. There are several types: Positive (the third party confirms agreement or disagreement; it is considered reliable evidence), Negative (the third party responds only if there is disagreement; it is less reliable and used for non-material balances), No Response (the check fails, requiring supplementary procedures like checking subsequent events), and Disagreement (the third party reports a different balance, requiring investigation).

Steps for external confirmation include: determining the information to be confirmed, selecting the appropriate confirming party, designing the request with direct return instructions to the auditor, and sending follow-up requests. The auditor must maintain a control chart documenting the quantity of requests sent and responses received across first, second, and third mailings. Reliability is compromised if responses are not direct or come from generic email accounts like Yahoo or Gmail; corporate accounts are mandatory. Confirmations for bank balances and financial obligations are considered indispensable.

Audit Working Papers (Cédulas de Auditoría)

Cédulas de auditoría are the documents where the auditor records data, information obtained during examination, and test results. They serve as material proof of the work performed and evidence of professional quality. With technological advances, these are increasingly created as electronic files, which maintain the same legal and professional properties as paper papers. Properties and Responsibilities: These papers belong to the auditor, but because they contain confidential data, the auditor is bound by professional secrecy and cannot reveal facts without authorization, except as required by law.

Classification by Use: 1. Continuous/Permanent use (information useful for several years like constitutive acts, long-term contracts, and procedure manuals). 2. Temporal use (information useful only for a specific period like bank reconciliations or balance confirmations). Classification by Content: a. Hoja de Trabajo (shows groups/rubrics of financial statements). b. Cédulas Sumarias (show the general ledger accounts forming a rubric). c. Cédulas de Detalle (relate items composing a ledger account). d. Cédulas Analíticas o de Comprobación (contain work to verify the correctness of an operation).

Indexing and Marks: To facilitate location, papers are marked with indices. A common alphanumeric system uses single letters for Assets ($A$ for Cash/Banks, $B$ for A/R, $C$ for Inventory, $U$ for Fixed Assets, $W$ for Deferred Charges), double letters for Liabilities and Capital ($AA$ for Notes Payable, $BB$ for Accounts Payable, $SS$ for Capital), and numbers for Results ($10$ for Sales, $20$ for Cost of Sales). Sub-indexing examples: $A-1$ (Summary of Cash), $A-1-1$ (Cash Count), $A-2-1$ (Bank Reconciliation). Marks are symbols (often in red or blue) indicating repetitive work, such as verified sums, calculations ($C=$), physical verification, or authorized documents.

International Standards on Auditing (NIA) Procedures

NIA 500 and related standards define various procedures: 1. Knowledge of the entity (NIA 315) is a continuous process of gathering and analyzing information to plan the audit. 2. Reperformance involves the auditor independently executing controls or procedures originally done by the entity. 3. Inspection is the examination of records, documents, or physical assets. 4. External Confirmation (NIA 505) is obtaining a direct response from a third party. 5. Inquiry involves seeking information from informed persons inside or outside the entity. 6. Analytical Procedures consist of evaluating financial information through relationships between data. 7. Observation is witnessing a process performed by others. 8. Recalculation is checking the mathematical accuracy of documents.

Physical Inventory Observation (NIA 501)

Historically, physical verification was not required until the McKesson & Robbins fraud in $1938$, which forced the profession to assume responsibility for inventory existence. Under NIA 501, if inventories are material, the auditor must obtain evidence by being present at the count. Objectives include Integrity (all existing items are recorded), Accuracy (quantities are correct), Existence (inventory is physically there), and Condition (valuation state).

Procedures include: evaluating management instructions, observing count procedures, inspecting inventory for damage or obsolescence, and performing selective test counts. If the auditor cannot attend due to unforeseen circumstances, they must observe counts on an alternative date. If attendance is not feasible, alternative procedures must be executed. For inventories held by third parties, the auditor should request confirmation from the third party or perform an inspection at their location. All results must be reconciled with book records and finalized in a report for management.

Property, Plant, and Equipment: Detailed Audit Guide

According to NIF C-6, PPE are tangible assets intended for use or production, not for sale in the normal course of business. Valuation follows the historical original cost principle. Depreciation is defined as a systematic and reasonable distribution of the asset's cost (minus residual value) over its useful life; it is a process of distribution, not valuation. It can be based on time or units produced and must be calculated consistently from the date usage begins.

Audit objectives for PPE include verifying they exist and are in use, confirming ownership, checking correct valuation and consistent depreciation methods, and determining liens or encumbrances. Significant risks include registering non-existent assets, failure to record sales or disposals (assets sold but not removed from books), and assigning incorrect useful lives. Substantive tests include physical inspection, recalculating depreciation based on established policies, and reviewing purchase invoices and contracts to validate legal ownership. In the Balance Sheet, PPE is presented after current assets, with accumulated depreciation deducted from the total.

Audit of Intangible Assets and Internal Control Components

Intangible assets are classified into two categories: 1. Items representing services or goods expected to produce future income (e.g., organization expenses, bond issuance discounts). 2. Incorporeal goods involving rights or privileges (e.g., patents, licenses, trademarks). Recognition requires reasonable certainty of future utility. They are valued at historical cost, which includes all acquisition or development expenses. Amortization must be systematic and documented. On the balance sheet, they appear as the last group of assets.

According to NIA 315, the five components of the Internal Control system are: 1. Control Environment (culture, integrity, ethics). 2. Risk Assessment Process (identifying and managing risks). 3. Information and Communication Systems (capturing and sharing relevant data). 4. Control Activities (policies and procedures). 5. Monitoring/Follow-up (tracking effectiveness over time). Auditors use these components to plan the audit and assess the risk of material misstatement.