Audit

The auditor must remember that all information collected during the audit needs to be sufficient enough to further the audit process. The information must not only possess the two qualities, relevance and reliability, but it should also test various assertions. For instance, in the audit of Walmart, the auditor should make an attempt to acquire information such as financial statements from the company’s bank, as opposed to acquiring the statements from Walmart’s management. Taking such crucial information from Walmart’s management will put the reliability of that information into question. It is possible that management may manipulate the financial statements, so that they are more appealing to the public and investors. Management may do things

Also he may conduct bank reconciliations on pertinent accounts to make sure no discrepancies or misstatements are found. The auditor should also perform vertical and horizontal analysis for the income statements and balance sheets by the use of ratios.

When performing risk assessment procedures and related activities to obtain an understanding of the client and its environment, the auditor shall obtain an understanding of the following:

To illustrate the linkage of management assertions to audit evidence in the context of auditing Notes Payable.

Elder, A. A., Beasley, M., & Elder, R. J. (2014). Auditing and assurance services (15th ed.). Upper Saddle River, NJ: Pearson.

Recommendation of types of accounting evidence and methods of gathering such evidence to support the financial status review.

Read the sections “Audit Programs” & “Audit Procedures for Obtaining Audit Evidence” in Ch. 3 of Auditing & Assurance Services.

It is possible for an auditor to come to an improper conclusion because documents, like invoices, could be easily falsified if management originally handles them or if the auditor receives them from management, like in the case of ZZZZ Best and Minkow. The auditor must always confirm payments directly with the third party.

Auditors have the responsibilities as well as management to report internal controls. The auditors must examine closely management’s claim of effectiveness and also physically test the controls. After the examination, the auditors should express their opinion and any recommendations to fix any internal control weaknesses.

The interview with Colin Smith, from Office Products Depot, meant I was able to identify the accounts receivable subsystem they used and their accounts receivable management. I focussed on their policies for the offering and checking of credit, managing credit levels, charging the credit customers, receiving payment from credit customers and the general management of credit customers. I will be using the information from the interview with Colin as well as information from fictitious accounts receivable to explain their policies.

SAS 67 (AU 330) describes two types of confirmations. A positive confirmation asks the respondent to provide an answer in all circumstances, while a negative confirmation asks for a response only if the information is incorrect. As you might predict, negative confirmations are not as competent as positive confirmations. Note that SAS 67 requires confirmation of a sample of accounts receivable due to the materiality of receivables for most companies.

They should be matching the invoice number and account numbers; this review should catch the error. Another control is the customers reviewing their statements to make sure that they are not being over charged, ect.

e. “The auditor considers the level of assurance, if any, he wants from substantive testing for a particular audit objective and decides, among other things, which procedure, or combination of procedures, can provide that level of assurance. For some assertions, analytical

* In the substantive test in stage, audit evidence is the information that the auditor is to make sure the appropriation of financial statement assertions, i.e. Existence, right and obligations, occurrence, completeness, valuation, measurement, presentation and disclosure of a particular transaction or account balance.

Assertions Existence and occurrence Audit Objectives: Substantiate the existence of receivables and the occurrence of revenue transactions. Prove none of the account receivables are fictitious. Completeness Audit objectives: Establish the completeness of receivables and revenue transactions. Rights and obligations Audit objectives: Determine the client has rights to the recorded receivables. Prove the accounts receivable are collectible in the normal course of business and are bona fide claims owe the company. Valuation or allocation Determine that the valuation of receivables and revenue is at appropriate net realizable values. Presentation and