Management assertions for the financial statements referenced in PCAOB Auditing standards

are:

Existence, occurrence

Completeness

Rights, Obligations

Valuation, Allocation

Presentation, Disclosure

The purpose of tests of controls is to permit the auditor to assess whether properly designed

controls operate effectively enough to prevent or detect material misstatements that would make

these management assertions wrong.

Required:

For Each of the following procedures identify whether the procedure is:

a) directed at a control or at an amount or disclosure, or both, and

b) what assertion (or assertions) is (are) targeted.

Accounts, Classes of

Audit Procedure

Directed

Assertions

Transactions

at

#1 All

Inquire who controls passwords for IT access

#2 Sales, Inventory,

receivables

Examine document packages for items that

have been shipped for inclusion of a customer

order, credit approval, shipping document.

Make sure the documents are properly

matched and complete, with all required

signatures and trace amounts to the sales

journal, accounts receivable subsidiary

ledger, and inventory files.

For the hourly Payroll Expense account,

Multiply the average number of workers

times the average number of hours worked

per year times the average hourly rate.

Compare to the total posted amount

#3 Payroll

#4 Cash

Inspect the client prepared reconciliation for

each month of the year, recalculate the

amounts, examine the supporting bank

statements, and trace the cash amount to the

general ledger.

#5 Fixed assets

Obtain a list of fixed assets and physically

look at the assets.

#6 Long Term Debt

Read the contract related to each of the

company's long term borrowings and agree

the terms of the contracts to the financial

statements notes.

#7 Cash, Long Term

Debt

For each item of long term debt that existed

both at the beginning and end of the year,

inspect the debt contracts and the company's

analysis of the discounted debt amount and

its analysis of the violation debt covenants

and look for whether the details agree.

recalculate the amounts, examine the

recorded entries and bank statements for cash

discernments for debt repayments. using that

information, determine whether the company

has been in violation of any debt covenants and look for whether the details agree. Recalculate the amounts, and examine recorded entries and bank statements for cash disbursements for debt repayment. Using the information, determine whether the company has been in violation of any debt covenants during the year.

#8 Prepaid Rent

Using the beginning financial statement amount, cash receipt and cash disbursements evidence, and the lease agreement, calculate year end prepaid rent and agree that amount to what is shown in the general ledger.

#9 Inventory

At the end of the last day in the fiscal year, go to the client's shipping area and record the last shipment; trace the shipment into the client's records.