Substantive testing

Learning objective

In this assignment, you will apply your knowledge of substantive testing to accounts payable at Alpine Bags.

Required

An audit program is a road map for conducting a particular part of the audit. An audit team will create audit programs for performing substantive and/or control testing within particular accounts. Each audit program is unique to the client and its current financial conditiontherefore, audit programs for Alpine Bags this year (2023) may be different from reviews of similar types of clients in past years. For the audit of the accounts payable of Alpine Bags, an audit program has been given to you by your Audit Manager. You should work through the audit program and perform the various audit procedures. In the program, you will see a column labelled Tick marks. A tick mark is a symbol used in audit testing as a form of shorthand to indicate that a particular audit procedure has been conducted. Tick marks should be placed as close as possible to the piece of information you are testing (a dollar amount, a signature, a date) if the test is successful. Do not use a tick mark if the test fails; for example, if two amounts do not match (and they should). The next columns labeled Initials and Date should be completed with your details once you have completed that particular audit procedure. In a large audit, multiple people are often involved in conducting procedures from a single audit programunderstanding which tests have been completed and by which staff members are vital to ensuring that the audit is managed and completed appropriately.

In Appendix 6, you will find documents required for the substantive testing of accounts payable. Using the audit evidence provided on the following pages, complete the following audit program.

Assignment 10

Alpine Bags Ltd. December 31, 2023

Testing of purchasingaudit program

Audit program item Tick marks Initials Date References 10-2.

Complete the following tests and document your testing on the evidence provided and in the relevant working paper table.

(a) For each supplier invoice, match the quantity invoiced to the quantity received by Alpine Bags and recorded it on the receiving report and on the purchase order. (b) For each supplier invoice, recalculate the cost of each line item. B (c) For each supplier invoice, recalculate the total cost of the invoice. C (d) For each supplier invoice and receiving report, check that the correct dollar amount is recorded in the purchases journal. D (e) For each entry in the purchases journal, ensure it is recorded in the correct financial period. E 38 Alpine Bags Ltd. An Audit Case Study 2. Document the misstatements found and make a conclusion as to whether the account is materially misstated. A103 3. List the correcting journal entries that should be completed. A104 Assignment 10 39 Alpine Bags Ltd. December 31, 2023 Substantive testing of purchasing Item Date Purchase Order Receiving Report A Qty match B Line cost C Invoice cost D Journal check E Period check 22 23 24 25 Note: For the purposes of this case study, sample tests 1 to 21 have been removed. There were no exceptions noted in the results. 40 Alpine Bags Ltd. An Audit Case Study Summarize the misstatements you have detected in the table below. Refer back to working paper A21 for materiality.

December 31, 2023 Summary of misstatements detected during substantive testing Misstatement Recorded amount Audited amount Misstatement amount Total sample misstatement Projected misstatement Total sample misstatement (1) Dollar value of sample (2) $892,546 Percentage of sample dollar misstatement (3) = (1) (2) Dollar value of population $23,686,521 Projected dollar value of misstatement = (3) Dollar value of population Conclusions __________________________________________________________________________

Assignment 10 41 W/P ref: A104 Prepared by: _____ Date prepared: _____ Alpine Bags Ltd. December 31, 2023, Suggested correcting journal entries Date Accounts Amount ($) Dr Cr Explanation Cr Explanation Dr Cr Explanation Dr Cr Explanation 42 Alpine Bags Ltd. An Audit Case Study