Audit procedure
Auditing procedures:
Five assertions:
1. Occurrence:
Define: transactions and events that have been recorded have occurred and pertain to the entity.
Explain: sales and purchases shown in the income statement belong to the company and are real, that is they actually took place.
2. Completeness:
Define: all transactions and events that should have been recorded have been recorded.
Explain: all the individual transactions making up the balances in the income statement are recorded; no sales or purchases are missing.
3. Accuracy
Define: Amounts and other data relating to recorded transactions and events have been recorded appropriately.
Explain: the values and any written information in the income statement are recorded at their correct amounts; no recording errors have occurred.
4. Cut-off
Define: Transactions and events have been recorded in the correct accounting period.
Explain: the income statement for say the year ended 31 December 2009 only contains sales and purchases for 2009, noting relates to 2008 or 2010.
5. Classification
Define: transaction and events have been recorded in the proper accounts.
Explain: all individual transactions are shown under the correct heading; for example, the amount stated for interest only includes interest paid and interest is not included under any other heading such as light and heat.
Transaction
1. Sales
1) Occurrence: all sales must relate to the company making the sale. The sale does not belong to the company. Working back from the recording of the sale, find the original sales order which authorized the transaction.
2) Completeness: all sales must be recorded. Some sales are not recorded. Trace individual sales all the way through an accounting system; that is sales order through to sales total in the financial statements.
3) Accuracy: all sales must be recorded at the correct amount in the sales day book and the correct receivables ledger/nominal ledger accounts. Errors are made in recording
Five assertions:
1. Occurrence:
Define: transactions and events that have been recorded have occurred and pertain to the entity.
Explain: sales and purchases shown in the income statement belong to the company and are real, that is they actually took place.
2. Completeness:
Define: all transactions and events that should have been recorded have been recorded.
Explain: all the individual transactions making up the balances in the income statement are recorded; no sales or purchases are missing.
3. Accuracy
Define: Amounts and other data relating to recorded transactions and events have been recorded appropriately.
Explain: the values and any written information in the income statement are recorded at their correct amounts; no recording errors have occurred.
4. Cut-off
Define: Transactions and events have been recorded in the correct accounting period.
Explain: the income statement for say the year ended 31 December 2009 only contains sales and purchases for 2009, noting relates to 2008 or 2010.
5. Classification
Define: transaction and events have been recorded in the proper accounts.
Explain: all individual transactions are shown under the correct heading; for example, the amount stated for interest only includes interest paid and interest is not included under any other heading such as light and heat.
Transaction
1. Sales
1) Occurrence: all sales must relate to the company making the sale. The sale does not belong to the company. Working back from the recording of the sale, find the original sales order which authorized the transaction.
2) Completeness: all sales must be recorded. Some sales are not recorded. Trace individual sales all the way through an accounting system; that is sales order through to sales total in the financial statements.
3) Accuracy: all sales must be recorded at the correct amount in the sales day book and the correct receivables ledger/nominal ledger accounts. Errors are made in recording