DEE, JOSEPH ASHLEY S.

BAC 319 BBF

ERGUIZA, MICAELA P. 03/05/2015
PENA, CLYDE IAN BRETT C.

SUBSTANTIVE AUDIT PROCEDURES

CASE 1

1. Confirm the account balance directly with the bank. Trace from the bank
reconciliation to cut-off bank statement.
2. Inquire/investigate the reason for the unusual delay. Trace from the bank
reconciliation to cut-off bank statement. Trace from the cut-off bank statement
to bank reconciliation. Supporting documents should be inspected.
3. Trace transaction to cash disbursement journal. Trace from the bank
reconciliation to cut-off bank statement. Trace from the cut-off bank statement
to bank reconciliation. The Supporting documents should be inspected.
4. Inspect bank credit memo for the note collected.
5. Inspect bank credit memo. Trace from the bank reconciliation to cut-off bank
statement.
6. Compare to general ledger account as of September 30, 2005.

CASE 2

1. Prepare a bank transfer schedule to determine whether cash is improperly

included in to two accounts.
2. Compare the cleared checks to the year-end bank reconciliation to identify
checks that were not mailed until after the first week of the subsequent year
because most of those checks will not be returned with the cut- off bank
statement and will appear to remain outstanding on an abnormally long
period of time.
3. Among the terms confirmed for such borrowing arrangement will be
information on liens.
4. A reply to the second request or information from the credit agency may
confirm the existence of the new customer. Examine the shipping documents
where the goods were shipped and to which party.
5. Observe the payroll check distribution on a surprise basis.
6. Vouch data in the payroll register to document authorized pay rates in which
an employee is earning income at a rate that differs from the authorized rate.
7. Compare the details of the cash receipts journal to the details on the daily
deposit slips.
8. The lack of supporting documents and receiving reports will alert the auditor
to the problems.
9. Scan the debits to the fixed asset accounts and vouch selected amounts that
will reveal repairs that have improperly been capitalized.
 10. Compare the cash receipts journal entries with the corresponding daily
deposit slips. Confirm the entity's accounts receivable on a surprise basis at
an interim date.
11. Make a bank transfer schedule.
12. Confirm the entity's accounts receivable on a surprise basis at an interim date.
Examine the shipping documents to verify delivery of the merchandise to the
customer with the receivable.

CASE 3

a. Dianne should find in the audit documentation a planning memo describing the
clients inventory-taking plan, and notes about the auditors first-hand
observation of the instructions being given to counters, along with a memo
about the auditors observation of the counting. The memo will tell about the
supervision of the audit staff, and the audit documentation of test counts would
show the review signatures of the supervising auditors.

b. The audit staff should perform the following substantive audit procedures to
verify the assertions of existence and completeness of the inventories at year
end:

Observe the client companys physical inventory count.

Scan the inventory compilation for items added from sources other than
the physical inventory count.
Obtain the number of the last shipping and receiving documents at year
end. Use them to scan the sales, inventory/cost of sales, and accounts
payable entries for proper cutoff.
Confirm or inspect inventories held in public warehouses.