Audit Procedures

What Are the Recalculation and Reperforming Procedures in An Audit?

Auditing is a process in which an auditor examines a subject matter. Usually, this subject matter is a client’s financial statements. The auditors can be internal or external to that client. However, they must be independent of the client’s management. The primary objective of this process is for the auditors to form an opinion based …

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Risk of material misstatement for accounts receivable

Meaning of Accounts receivables Accounts receivables generally mean Trade receivables in the financial statement of large listed public companies. Accounts receivables are disclosed under the headings “Current Assets”. These are trade or non-Trade receivables that have been specified by the company or regulations and meet the criteria of being classified separately. Accounts receivables are characterized …

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What is the risk of material misstatement?

Meaning of Risk of Material Misstatement The risk of material misstatement is the susceptibility of the financial statements, accounts, and assertions to material misstatement, and the risk that the client’s current internal controls would be ineffective in proactively identifying and correcting the misstatements. The inherent risk and control risk in the obligations form the risk …

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How to Assess Materiality In An Audit?

Meaning of materiality There is no specific definition of materiality under U.S. Generally Accepted Accounting Principles (GAAP). However, the gist as per the Conceptual Framework for Financial Reporting under International Financial Reporting Standards states that information is to be considered material if it influences the decisions of stakeholders who are depending on the financial information …

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Auditing Retained Earnings and Dividend: Procedure, Risks, and Assertions

Meaning of retained earnings The company operates in a business environment and strives to obtain higher and higher profits each year. The net profit is obtained by deducting the expenses from the revenues. These net profits are appropriated to reserves and surplus. Such profits when transferred to reserves and surplus after paying off the dividend …

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Auditing Investment: Assertions, Risks, and Key Procedures

Meaning of Investments Investment is the deployment of capital in order to earn interest, dividend, or capital appreciation. Investments are basically either held to maturity or available for sale securities. Held to maturity securities are those that are held with intent until maturity. These are reported at cost, provided for amortization and accretion of discounts. …

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Search for Unrecorded Liabilities: Definition, Example and Procedures

Definition: Search for unrecorded liabilities is the audit testing procedure that auditors perform to verify if they are understated by completely not recording them. Auditors perform such tests of the search for unrecorded liabilities to give an appropriate response to assess the risk of understatement of liabilities. In the industrial environment, searching for unrecorded assets …

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What is Journaling Entry Testing? Why Is It Important?

Journaling entry testing: The need for journal entry testing arises when the auditor needs to test the nature, timing, and extent of journal entries. It is done to recognize the risk of material misstatement due to fraud while recording financial transactions. The auditor should be vigilant in its audit of transactions and look at all …

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