AU-Lesson4.pptVIP

Substantive tests the auditor would do on such a transaction file include the following: Adding up the transactions, providing subtotals by month, and agreeing the subtotals to the general ledger accuracy, posting, and summarization Adding up the individual lines of the invoice and comparing with the total for each invoice, printing exceptions accuracy . Textbook page 397,Figure 12-7 Example: Textbook page 399,Figure 12-8 Summary Audit Planning Analysis and planning Materiality Risk Audit Programs Analysis Definition Application Components Risk Model Test of control Substantive test * * The presence of these relationships provides audit evidence as to the completeness, accuracy and validity of the data produced by the accounting system * Analytical procedures include the comparison of the entity’s financial statements with prior period information, anticipated results such as budgets, and similar industry information. General analytical procedures include trend analysis, ratio analysis, statistical and data mining analysis, and reasonableness tests. * General analytical procedures include trend analysis, ratio analysis, statistical and data mining analysis, and reasonableness tests. Trend analysis is the analysis of changes in an account balance over time. Ratio analysis is the comparison of relationships between financial statement accounts, the comparison of an account with non-financial data, or the comparison of relationships between firms in an industry. Reasonableness testing is the analysis of account balances or changes in account balances within an accounting period in terms of their “reasonableness” in light of expected relationships between accounts. * * Data mining is a set of computer-assisted techniques that use sophisticated statistical analysis, including artificial intelligence techniques, to examine large volumes of data with the objective of indicating hidden or unexpected information or patterns. For these tests auditors generally use co