Identify and explain the assertions that the auditor will check by performing the following audit procedures- (i) Inventory recognised in the…

CA Intermediate · Auditing and Ethics · MTP · May 2025
Identify and explain the assertions that the auditor will check by performing the following audit procedures- (i) Inventory recognised in the balance sheet actually existed as at the period end. (ii) All the items of inventory pertaining to the relevant year shall be included regardless of the location. (iii) All goods dispatched prior to the period/ year-end have been invoiced and included in debtors on a test check basis. (iv) Examine client correspondence, sales and receivables records, purchase documents. (v) Verifying that the entity has charged depreciation on all items of PPE unless any item of PPE is non-depreciable like freehold land.

Suggested Answer and Working Notes:

(i) Existence Assertion: The auditor will check the Existence Assertion to ensure Assets, liabilities and equity balances exist as at the period end. (ii) Cut-off Assertion: The auditor will check the Cut-off assertion to ensure that all assets and liabilities are reported in the appropriate period. (iii) Completeness Assertion: The auditor will check Completeness Assertion to ensure all Trade receivable balances that were supposed to be recorded have been recognized in the financial statements. (iv) Rights & Obligations Assertion: The auditor will check Rights & Obligations assertion to ensure that the entity has valid legal ownership rights over the inventories claimed to be held by the entity and recorded in the financial statements. (v) Valuation Assertion: The auditor will check Valuation assertion to ensure PPE have been valued appropriately and as per generally accepted accounting policies and practices.

Topics: Audit of Items of Financial Statements

Open in Interactive Practice Hub · Full Practice Hub · Chapter Weightage · More in this subject

Related Questions in this Topic