1. Introduction to MPAcc 5P37
CAS 300 – Planning an audit of financial statements

2. Key Points Management assertions
Management assertions give rise to Audit Objectives
What type of tests?
Thus have
N.B. For each audit objective there must be an audit test

3. Management Assertions
Transaction (Events)
Occurrence
Completeness
Accuracy
Cutoff
Classification

4. Management Assertions
Balances
Existence
Rights and Obligations (Ownership)
Completeness
Valuation and Allocation

5. Management Assertions
Presentation and Disclosure
Occurrence
Rights & Obligations (Ownership)
Completeness
Valuation & Accuracy
Classification & Understandability

6. Transaction-Related Audit Objectives
Specifically for transactions or events
There are five audit objectives for transactions
Occurrence
Completeness
Accuracy
Posting and summarization
Classification
Timing (Cutoff)

7. Balance Related Audit Objectives
To see if a balance is fairly stated
Five objectives
Existence
Rights and Obligations (Ownership)
Completeness
Valuation (or realizable value)
Allocation

8. Presentation & Disclosure Related Audit Objectives
Used to examine financial statements
Seven objectives
Occurrence
Rights and Obligations (Ownership
Completeness
Accuracy
Valuation
Classification
Understandability

9. Examples Asset Existence Inventory Completeness Sales Occurrence
The test
Inventory Completeness
Sales Occurrence
Sales timing

10. (1) From another text
The following are two balance-related audit objectives in the audit of accounts payable.
All accounts payable included on the list represent amounts due to valid vendors.
There are no unrecorded accounts payable.
The list referred to in the objectives is the aged accounts payable balance produced using the supplier master file. The total of the list equals the accounts payable balance on the general ledger.
REQUIRED
Explain the difference between theses two balance-related audit objectives
For the audit of accounts payable, which of these two balance-related audit objectives would usually be more important? Explain.

11. (2) From another text
The following (1 through 17) are the balance-related, transaction-related, and presentation- and disclosure-related audit objectives.
Assertions About Classes of Transactions and Events
Assertions About Account Balances
Assertions About Presentation and Disclosure
1. Occurrence
6. Existence
11. Occurrence and
7. Rights and Obligations
12. Rights and Obligations
2. Completeness
8. Completeness
13. Completeness
3. Accuracy
14. Accuracy and
9. Valuation and
15. Valuation
10. Allocation
4. Cutoff
5. Classification
16. Classification
17. Understandability

12. (2) - continued REQUIRED
Identify the audit object (1 through 17) of each of the following audit procedures for the audit of sales accounts receivable., and cash receipts for the current fiscal year.
Examine a sample of duplicate sales invoices to determine whether each one has a shipping document attached.
Add all customer balances in the accounts receivable trial balance and agree the account to the general ledger.
For a sample of sales transactions selected from the sales journal, verify that the amount of the transaction has been recorded in the correct customer account in the accounts receivable total field of the customer master file.
Inquire of the client whether any accounts receivable balances have been pledged as collateral on long-term debt and determine whether all required information is included in the footnote description for long-term debt.
For a sample of shipping documents selected from shipping records, trace each shipping document to a transaction recorded in the sales journal.
Discus with credit department personnel the likelihood of collection of all accounts with a balance greater then $100,000 and greater than 90 days old as of the year-end.
Examine sales invoices for the last five sales transactions recorded in the sales journal in the current year and examine shipping documents to determine that they are recorded in the correct period.
For a sample of customer accounts receivable balances at the year-end, examine subsequent cash receipts in the following month to determine whether the customer paid the balance due.
Determine whether all risks related to accounts receivable are adequately disclosed.
Foot the sales journal for the month of July (hallway through the fiscal year and trace posting to the general ledger.
Send letters to a sample of accounts receivable customers to verify whether they have an outstanding balance at the fiscal year-end.
Determine whether long-term receivables and related party receivables are reported separately in the financial statements.