FIGURE 1.

THE AUDITOR’S CONSIDERATION OF

INTERNAL CONTROL IN AN AUDIT
FIGURE 2. TYPES OF CONTROL ACTIVITIES THAT
RELATE TO FINANCIAL STATEMENT ASSERTIONS
ASSERTION RELATED CONTROL ACTIVITIES
Existence or occurrence Procedures that require documentation, approvals, authorization,
verification, and reconciliations.

Example 1. An employee or official who does not handle cash receipts

or credit approval authorizes the write-off of an uncollectible
account.

Example 2. Cash disbursement should be supported by complete

documentations such as purchase requisition, purchase order,
receiving report and vendor’s invoices.

Completeness Procedures that ensure that all transactions that occur are recorded
such as accounting for a numerical sequence of documents.

Example: transfer of goods should be accompanied by prenumbered

document documents such as deliver ticket or bill of lading and
accounted for in the period issued to ensure proper recording
Rights and obligations Procedures that ensure that the entity has a right to assets or an
obligation to pay arising from the transaction.

Example. A sale to a customer should be supported by a sales of

invoice and acknowledged delivery receipt.
Valuation and allocation Procedures that ensure that a proper price is charged and that
mathematical accuracy are present in recording and in developing the
accounting records and the financial statement.

Example. A sale employee traces the price used on an invoice to a

Presentation and disclosure
price list in the effect at the time. (FMV)
Procedures that indicate that a review has been made to ascertain
that a transaction has been recorded in the proper account and that
financial statement disclosure have been reviewed by a competent
personnel.

Example. The chief accountant reviews correctness of journal entries

made by an accounting clerk.
FIGURE 3. RELATIONSHIP OF AUDIT RISK AND
SUBSTANTIVE AUDIT PROCEDURES