Learning ObjectivesLO4 Describe the typical substantive procedures used to address the assessed risk of material misstatement in the main account balances and transactions in the revenues, receivables, and receipts process.LO5 Explain the importance of the existence assertion for the audit of cash and accounts receivable.LO6 Identify considerations for using confirmations when auditing cash and accounts receivable.LO7 Describe the audit of bank statement reconciliations and how auditors identify accounts receivable lapping and suspicious cash transactions.

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Special Note: The Existence AssertionFor accounts receivables and other assets, auditors place emphasis on existence and rights assertions.

Computation Focus on assets that depend largely on

calculations. Inspection of Physical Assets

Inventories and assets can be examined, title documents can be vouched, security documents can be inspected.

LO5

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Special Note: The Existence Assertion

Confirmation Bank accounts, receivables can be confirmed. Assets at other locations or in the hands of

custodians can also be confirmed.

Enquiry Enquire as to agreements regarding minimum

balances, pledging of receivables, pledging of other assets.

LO5

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Special Note: The Existence Assertion

Inspection of documents (vouching) Examine title documents, collateral, pledges.

Inspection of documents (scanning) Look for misclassified assets, uncharacteristic

balances, errors or overpayments, or related party transactions and balances.

LO5

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Special Note: The Existence Assertion

Analysis Comparison of assets to related revenues or

expenses, expenses with revenues, contra revenues with revenues, and write-offs.

LO5

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