Substantive Audit Testing Revenue

Knowledge about risks related to the company evaluated as part of the auditor 's client acceptance and retention evaluation; and the relative complexity of the company 's operations. ( Auditing Standard No. 9 //. (n.d.).

In order to confirm the accounts receivable balances, I decided to use positive confirmations since this was my first time auditing the company and the collateral for the loan would be the receivables. The confirmations helped to verify the accuracy and existence of the accounts. I also calculated the Receivables Turnover Ratio in order to better evaluate the overall success of collection on accounts. The sample size that I chose was determined by the factors of tolerable misstatement, inherent risk, control risk, achieved detection risk

a. Describe the purpose of analytical procedures performed in the planning stage of the audit.

3. In the auditor 's report the financial statements on which the opinion is being expressed

Examine evidence that the accounts receivable master file to the general ledger for accounts receivable.

A ) The objective of an audit is to safeguard agreeability with the customer's work benchmarks, assess execution and amplify benefits. Clearly, regardless of how skilful the auditor is, auditing every record is a physical outland possibility. Regardless of the possibility that 100 percent of the data could be tried, the expense of testing would likely surpass the normal advantages (the confirmation that goes with analysing 100 percent of the aggregate to be inferred. What is needed is an examining of the records. There are various techniques used by auditor for decision making during auditing. Auditors will not test all the information available to them because they are uneconomical

The auditor should have verified the accuracy and the existence of the figures that were appearing in the income statement as revenue. The verification of the sales system should include authorization of the sales and the accounts recording of these sales (Rittenbergm Et al., 2009). An audit on the sale systems involves ensuring that there is proper authorization of the sales orders, proper matching of customers to these orders, payments and the invoices and the records of goods outwards. An audit plan on revenue and sales system should include verification of any sales figure that appears at the end of the financial period as in most cases, there is a possible risk of fraud or wrong adjustment of figures. It would also include an audit on the sales ledger control

There are four things that an auditor needs to assess prior to performing an audit:

1a) What should the auditor consider when determining whether an account should be considered significant?

Under audit planning, the auditor decides whether to accept a new client or continue serving an existing one. This determination is

2. Auditors are required to consider evidence obtained and accumulated throughout the audit and make an overall evaluation as to whether substantial doubt exists with respect to the ability of the client

d. “The auditor's reliance on substantive tests to achieve an audit objective related to a particular assertion may be derived from tests of details, from analytical procedures, or from a combination of both. The decision about which procedure or procedures to use to achieve a particular audit objective is based on the auditor's judgment on the expected effectiveness and efficiency of the available procedures. For significant risks of material misstatement, it is unlikely that audit evidence obtained from substantive analytical procedures alone will be sufficient (PCAOB, AS 2305.09).”

B) I think the auditors should have equal responsibility for detecting material misstatements due to error and fraud. It’s their job to make sure the financial statements are as accurate as possible. Although it may be hard to check all the information from a company it’s the responsibility of the auditor to sign off that everything is in check.

d. Trace the date, check number, and amount of outstanding item – Occurrence & Completeness. (AU-C 315.A114 a.i-ii)

3. What potential implications arise for the accounting firm if they issue an unqualified report without the going-concern explanatory paragraph?