The audit objectives to be achieved for the audit of cash substantiate the following assertions: existence, completeness, rights and obligations, valuation, and presentation and disclosure. One of the objectives for a cash audit is to verify that the recorded cash balances exist at the balance sheet date and reflect all cash and cash items on hand, in transit, and on deposit with third parties. This objective validates both the existence assertion and part of the completeness assertion. Another objective is to make sure that the recorded cash balances include all of the cash transactions that have occurred along with the effects from those transactions; this would satisfy the remaining component of the completeness assertion. A third objective is to confirm that the entity has legal title to all cash balances shown on the balance sheet at the balance sheet date. This objective validates the rights and obligations assertion. A fourth objective is to verify that the recorded cash balances are realizable at the amounts stated on the balance sheet and those amounts match supporting schedules; this would satisfy the valuation assertion. A fifth objective is to make certain that cash balances are properly identified and classified in the balance sheet and that all lines of credit, loan guarantees, and other restrictions on cash balances are appropriately disclosed. This objective substantiates the presentation and disclosure assertion. The following sections outline a list of possible audit procedures that aid in achieving the objectives mentioned. The auditors should begin verifying cash balances by performing a few initial procedures on cash balances and records. They should trace the current period's opening balances... ... middle of paper ... ...ndependent source. In doing this, they can secure a high degree of proficient, corroborating information about the validity of the year-end bank reconciliation. This also provides additional evidence to the existence, completeness, rights and obligations, and valuation assertions for cash. Cash should be accurately identified and classified in the financial statements. The auditors determine the correctness of the financial statement presentation from the evidence obtained from the previously mentioned audit procedures. The auditors should inquire about any evidence of restrictions on the availability of funds and make sure those restrictions are properly disclosed. In addition, the auditors should compare financial statement presentation with the applicable accounting standards. These procedures provide evidence to the presentation and disclosure assertion.
During the Simply Soups, Inc. audit, we were responsible for confirming the balances for each of the company’s bank accounts. The purpose of sending confirmations is to obtain a reasonable expectation that the balances presented on the books reflect the actual values recorded by the banks, addressing any issues of existence. In addition to providing validation from a reliable source, confirmations also allow us to reconcile any issues concerning money in transit.
Accounts receivable balances are tested by sending confirmation letters to customers to obtain objective assurance that the balance is correct. The auditor also chooses sales transactions from the sales ledger and verifies that there are legitimate sales receipts to back up the transaction. To test the accuracy of the sales figure, the auditor reviews sales transactions in the ledger close to the financial statement date to ensure that the company only included sales prior to that date.” What Are the Audit Procedures for the Sales & Collection Cycle? (n.d.).
...l. If a transaction is missing or the cash on hand is not adding up management should be notified.
According to the conceptual framework, the potential users of financial statements are investors, creditors, suppliers, employees, customers, governments and agencies, and the general public (Financial Accounting Standards Board, 2006). The primary users are investors, creditors, and those who advise them. It goes on to define the criteria that make up each potential user, as well as, the limitations of financial reporting. The FASB explicitly states that financial reporting is “but one source of information needed by those who make investment, credit, and similar resource allocation decisions. Users also need to consider pertinent information from other sources, and be aware of the characteristics and limitations of the information in them” (Financial Accounting Standards Board, 2006). With this in mind, it is still particularly difficult to determine whom the financials should be catered towards and what level of prudence is necessary for quality judgment.
The purpose of an auditor's job is to make an assertion. In order to do so, evidence must be collected to authenticate said opinion. AS 1105 details the characteristics of audit evidence and the steps necessary to obtain an appropriate level of audit evidence. If the risk of material misstatement is high, the amount of required evidence collected also increases. Quality over quantity is another precept of audit evidence. The higher the quality, the less evidence is needed; whereas increasing the amount of substandard evidence collected does not bolster a position. The relevance and reliability are also two metrics used to evaluate audit evidence; both are required characteristics and must be
We will follow proper accounting and disclosure practices. All record keeping and financial statements will be prepared according to GAAP standards and reviewed by an independent
The directors need to be able to view the financial performance of the group in order to make relevant and informed decisions. In order to obtain this information the correct procedures, as mentioned, must be followed to ensure that assets are not overstated and liabilities
Among other things, when the FASB created the statement of cash flows a vital part, it permitted either the direct or indirect approach/method. However, if the direct approaches are picked, the FASB demands that it be helped by a schedule of the adjustments that make up earnings to cash on the condition that it’s used by operating activities. This particular schedule can be shown as either in the footnotes on the financial statement or on the cover of the statement. In addition, commonly allowed accounting principle ask for that under either approach or method cash figures paid out for things like taxes and interest must be made known
In reviewing the company’s balance sheet, the current assets and liabilities were reviewed and liquidity ratios were calculated. The capital structure and the fixed and intangible asset accounting of the company were also reviewed. Off-balance sheet items such as leases and contingent liabilities were reported and noted. All of these aspects of the balance sheet were reviewed in order to do a proper analysis of the company’s balance sheet.
(i) Judgement and materiality play a significant role in helping to ensure that the selection of accounting policies in presenting the financial statements for a true and fair picture of the company’s financials. This means that entities should provide the financial statements with comparability, consistency and clarity to users of these statements. Entities must follow accounting policies required by IFRS and AASB should be relevant to particular circumstance.
The statement of cash flows reports a firm’s major cash inflows and outflows for a period. This statement provides useful information about a company’s ability to generate cash from operations, maintain and expand its operating capacity, meeting its financial obligations, and pay dividends. There are three types of activities to look at in this statement, which are cash flows from operating activities, investing activities, and financial activities (3, 2005).
"The objective of financial statements is to provide information about the financial position, performance and changes in financial position of an enterprise that is useful to a wide range of users in making economic decisions."[Financial statements should be understandable, relevant, reliable and comparable. Reported assets, liabilities and equity are directly related to an organization's financial position. Reported income and expenses are directly related to an organization's financial performance.
No matter auditors work with technology or not, the most important thing in process of auditing is evidence. The basic framework for the auditor understands of evidence and its use to support the auditor's opinion on the financial statement. In reaching an opinion on the financial statements, the evidence gathered from the audit procedure is used to determine the fairness of the financial statements and the type of audit report to be issued. The characters of paper audit evidence are:
Maintaining a company’s financial assets is a daunting task. Cash management techniques and short-term financing provide accounting executives with the tools needed to survive the constant changes within the economy. The combination of these tools and the knowledge of the world economy will assist companies in maintaining current assets and facilitates growth.
Auditing has been the backbone of the complicated business world and has always changed with the times. As the business world grew strong, auditors’ roles grew more important. The auditors’ job became more difficult as the accounting principles changed. It also became easier with the use of internal controls, which introduced the need for testing, not a complete audit. Scandals and stock market crashes made auditors aware of deficiencies in auditing, and the auditing community was always quick to fix those deficiencies. Computers played an important role of changing the way audits were performed and also brought along some difficulties.