RELEVANT ASSERTIONS
B/S P/L
R& P& P&
Index Title Significant Account and Primary Substantive Procedures E V C
O D
O M C
D
C Cash, including bank balances
1 Bank confirmations Obtain a complete list of bank accounts (debit and credit balances) as well as X X X X X
related loan and similar contracts. Obtain bank confirmations for all accounts,
including the accounts closed during the year to confirm the relationship with the
bank including contingencies, liens, pledges, restrictions on the client´s assets,
guaranteed amounts etc. If there is a valid reason for not confirming all accounts,
document the rationale in the working papers.
2 Bank reconciliations Examine the client's bank reconciliation as of year-end, including cash-in-transit X X X
accounts, (e.g. in subledgers) to verify the proper reconciliation of bank
statements and general ledger accounts.
3 Cash cutoff Test cutoff of cash receipts and cash disbursements for transfers between X X
different bank accounts at the balance sheet date.
4 Cash valuation Test appropriate valuation of cash and cash equivalents (including overdrafts) in X
foreign currencies.
AR Accounts Receivable, trade
1 Agreement of subledger Agree receivables subledger to the general ledger control account and investigate X X
with general ledger large and unusual reconciling items.
2 Confirmations and Verify the existence of accounts receivable trade through confirmation or X X X X
subsequent cash receipts subsequent cash receipts or a combination of those procedures. Consider using
the audit risk tables to determine the extent of the sample or document the
rationale for the sample selection in the working papers.
3 Roll-forward procedures If accounts are verified at an interim date, review the “roll-forward” of activity X X X
from the interim date to the balance sheet date in a manner responsive to
combined risk assessment and compare level of activity with prior periods.
Investigate unusual items; consider confirming (at the balance sheet date)
significant new accounts and those accounts with significant increases or
decreases between the interim date and the balance sheet date.
4 Accounts receivable Perform analytical procedures to identify peaks in sales volume in the last few X X
cutoff days or weeks of the year and test cutoff by inspecting sales register, billings,
shipping documents and other supporting documents before and after the year-
end date. When performing substantive procedures at an interim date, cutoff
testing is performed at that date also.
5 Allowance for doubtful Evaluate the adequacy of the allowance for doubtful accounts. X X
accounts
6 Other adjustments to Evaluate the adequacy of other adjustments to accounts receivables, such as X X
accounts receivable rebates, credit memos, discounts.
7 Accounts receivable in Test appropriate valuation of accounts receivables in foreign currencies. X X
foreign currencies
8 Credit balances and Inquire about or review list of credit balances and investigate large items. X X
unusual items
1 Primary Substantive Procedures
RELEVANT ASSERTIONS
B/S P/L
R& P& P&
Index Title Significant Account and Primary Substantive Procedures E V C
O D
O M C
D
I Inventories
1 Observation of physical Observe the taking of physical inventories ensuring that client count instructions X X X X
inventories are followed and that inventories owned by others are separated and trace test
counts to the inventory compilation.
2 Confirmation of If significant, confirm inventories held by others at the physical inventory date X X X
inventories held by others and trace confirmed quantities to the inventory compilation; consider observing
these physical inventories as well.
3 Reconciliation of Review the reconciliation of the valued physical inventory compilation with the X X
inventory compilation general ledger account balances and the perpetual inventory records. Investigate
with general ledger large and unusual reconciling items.
4 Roll-forward procedures If inventories are taken at an interim date, review the "roll-forward" X X
documentation in a manner responsive to combined risk assessment and
investigate unusual items.
5 Inventory cutoff Trace the cutoff information obtained during the physical observation to the X X
accounting records of sales and purchases.
6 Valuation in accordance Test the valuation of inventory to ensure that it is performed in accordance with X X
with accounting policies the client´s accounting policies or applicable financial reporting framework.
7 Net realizable value Test the allowances to reduce the valuation of inventory to net realizable value, X
testing e.g., reserves for slow moving items or obsolescence.
OA Prepaid expenses, deferred charges and other assets
1 Verification of existence Verify existence and carrying amounts through examination of supporting X X X X X
and valuation documents, or confirmation or a combination of those procedures.
2 Primary Substantive Procedures
RELEVANT ASSERTIONS
B/S P/L
R& P& P&
Index Title Significant Account and Primary Substantive Procedures E V C
O D
O M C
D
IN Investments, including investments in affiliates
1 Verification of existence Verify the existence and ownership of recorded investments, including those in X X X X
and ownership affiliates, through confirmation or examination of evidence of ownership.
Investigate unusual items.
2 Detailed minutes review Review minutes (shareholders, board, executive committee, etc.), agreements X X X X X
and confirmation replies for evidence of existence, liens, pledges or other
security interests in investments; and of commitments to acquire or dispose of
investments.
3 Valuation in accordance Inspect market quotations, financial statements of investees and other evidence X X
with accounting policies of current value, cost or equity amount of investments and test that investments
are carried in accordance with the client`s accounting policies or applicable
financial reporting framework including foreign currency translations.
4 Impairment testing Use information obtained during the audit in determining whether management X X
has identified appropriate indicators of impairment and ensure that reserves
carried forward from prior periods are still appropriate.
IC Intercompany balances and transactions
1 Verification of Obtain a complete list of affiliated companies and obtain confirmation of X X X X X
intercompany account receivables from and payables to affiliates, or agree the account balances with
balances those in the affiliates' records.
2 Valuation of Test the carrying amounts of intercompany accounts, including those in foreign X
intercompany accounts currencies.
3 Intercompany accounts Test cutoff by inspecting sales register, billings, shipping documents and other X X
cutoff supporting documents before and after the year-end date.
4 Allowance for doubtful Evaluate the adequacy of the allowance for doubtful intercompany receivables X
intercompany receivables considering the aging and findings from audit procedures performed in the area
of investments.
LTR Long-term receivables, non-current deposits, and other long-term financial
assets
1 Verification of existence Verify the existence and ownership of long-term receivables through X X X X X
and ownership confirmation or examination of supporting documentation.
2 Valuation of long-term Test the carrying amounts of long-term financial assets. X
financial assets
3 Primary Substantive Procedures
RELEVANT ASSERTIONS
B/S P/L
R& P& P&
Index Title Significant Account and Primary Substantive Procedures E V C
O D
O M C
D
PPE Property, plant and equipment and related income statement accounts
1 Agreement of subledgers Obtain a schedule of property, plant and equipment, including capitalized leases, X X X X X
with general ledger and related additions, disposals, reclassifications and depreciation, depletion
and/or amortization (PPE subledger) and agree balances to the respective general
ledger accounts.
2 Additions and disposals For significant additions and disposals during the year, examine invoices, capital X X X X X X X
expenditure authorizations, leases and other data that support these additions and
disposals.
3 Leases, repair and Review and examine support for rentals under operating leases and for X X X X
maintenance significant charges to repairs, maintenance and other expense accounts to
determine if they should be capitalized as property, plant and equipment.
4 Depreciation, depletion Review reasonableness of depreciation, depletion and amortization charge by X X X X
and amortization reference to the client's accounting policies or applicable financial reporting
framework and expectation for current year.
5 Impairments of property, Use information obtained during the audit in determining whether management X X
plant and equipment has identified appropriate indicators of impairment.
IG Intangibles
1 Evidence of changes in Obtain a schedule of intangibles, and test the bases on which additions, X X X X X
intangibles amortization and disposals are recorded. Examine invoices, authorizations,
contracts, agreements, and other data that support ownership of intangibles or
deferred charges capitalized and disposed of during the year.
2 Impairment of intangibles Test the need for depreciation according to the client's accounting policies or X
applicable financial reporting framework to reflect impairment of the carrying
amounts of intangible assets or goodwill, which are not subject to regular
depreciation.
4 Primary Substantive Procedures
RELEVANT ASSERTIONS
B/S P/L
R& P& P&
Index Title Significant Account and Primary Substantive Procedures E V C
O D
O M C
D
NP Notes payable
1 Verification of notes Confirm notes payable or review supporting documentation as to amounts owed, X X X X X
payable and related terms, collateral and restrictions and the debtor's compliance with the loan
obligations provisions and identify liens, security interests, and assets pledged as loan
collateral.
2 Inspection of contracts Inspect documentation of loan agreements or other short-term lending X X X X X
arrangements (e.g., factoring) to determine the terms, restrictions, revolving lines
of credit, and other pertinent provisions of notes payable.
3 Compliance with contract Test calculations and other evidence relating to compliance with the terms, X X X
terms restrictions, or other provisions of loan agreements.
AP Accounts payable, trade
1 Agreement of subledger Agree the accounts payable subledger to the general ledger control account and X X
with general ledger investigate large and unusual reconciling items.
2 Unusual item review Inquire about or perform a review of accounts payable subledger for unusual X X X X X
items, e.g., significant debit balances in the accounts payable subledger or other
unexpected amounts to verify proper classification and valuation.
3 Accounts payable cutoff Perform cutoff tests for goods and services received as well as for supplier credit X X X
memos to ensure that transactions are completely recorded in the correct period.
4 Search for unrecorded Perform a search for unrecorded liabilities at the year-end date by selecting X X
liabilities subsequent disbursements and unmatched invoices and receiving reports.
5 Analysis of supplier Compare supplier balances post year end to those at year end and investigate X
balances unusual or significant changes.
6 Valuation of accounts Test appropriate valuation of accounts payable in foreign currencies. X
payable
IT Income taxes, deferred taxes and related income statement accounts
1 Reconciliation of Test the reconciliation of the current year book/statutory and taxable income, X X X X X
accounting to taxable validate the split between permanent and timing difffences, and compare
income reconciling items with those in prior years and examine support.
2 Provisions for income Test computations of provisions for current and deferred income taxes for the X X X X
taxes current year and reconcile to appropriate balance sheet and income statement
accounts.
3 Impairment of deferred Investigate potential impairments of deferred tax assets. X X X
tax assets
4 Movement of income tax Review the movement of income tax account balances from prior year (including X X X X X
account balances those currently payable or deferred) and valuation allowances for deferred tax
assets.
5 Provisions for certain tax Determine whether provision should be made for any tax positions taken by the X X X X X
positions client or other tax contingencies, e.g., as a result of related party transactions,
that may be challenged by tax authorities.
6 Basis for recording related Test that intercompany and other related party transactions have a valid business X X X
party transactions reason and are recorded on an arm's length basis. If in doubt, consider the
involvement of appropriate specialists.
5 Primary Substantive Procedures
RELEVANT ASSERTIONS
B/S P/L
R& P& P&
Index Title Significant Account and Primary Substantive Procedures E V C
O D
O M C
D
OL Provisions, accrued and other liabilities, deferred income
1 Correctness and Review the schedule of provisions, accrued liabilities and deferred income for X X
completeness of correctness and completeness, agree amounts to the general ledger accounts and
provisions ensure proper cutoff.
2 Pension and other Examine the composition and computation of pension and other employee X X
employee related long- related long-term reserves for reasonableness and consider the use of specialists.
term reserves
3 Appropriateness of other Review other liabilities to determine they are appropriate. Determine that the X
liabilities amounts appear to be reasonable in comparison with prior years and under
consideration of understanding of the clients business and changes to it.
4 Detailed review of Review lawyer confirmations, minutes and other documents to ensure that X X X X X
lawyers confirmations appropriate reserves/accruals have been recorded by the client.
5 Search for unrecorded Search for unrecorded reserves/accruals, e.g., related to employees, contracts X X X
reserves and accruals (rent, lease), finance (interest), sales (product and service warranties,
commissions, returns), purchases (goods and services, licenses, royalties),
services received (audit, tax, legal, consulting).
LTP Long-term debt, leases and related income statement accounts
1 Long-term debt interest Review summary of long-term debt & interest prepared by the client for X X X X X X X X X
expenses and compliance reasonableness of calculations of interest expense and accrued interest including
with agreements foreign currency translations and agree schedules to general ledger. Test
compliance with the terms, maturities, restrictive covenants, or other provisions
of debt agreements.
2 Inspection of new For new agreements in the year under audit, inspect original or authenticated X X X
agreements copies of debt agreements, or other related documents to test the terms,
restrictive covenants and other pertinent provisions of long-term debt.
3 Collaterals Identify liens, security interests, and assets pledged as collateral for debt, cross- X X X X
reference to the corresponding general ledger accounts and ensure proper
disclosures.
4 Verification of existence Confirm long-term debt or review supporting documentation as to amounts X X X X X X
and obligations owed, terms, collateral, restrictions and the client's compliance with the
provisions of the agreements.
5 Lease and rent contracts Review summary of lease and rent contracts and test correct presentation (e.g., X X X X
operating or finance lease) in the financial statements.
6 Primary Substantive Procedures
RELEVANT ASSERTIONS
B/S P/L
R& P& P&
Index Title Significant Account and Primary Substantive Procedures E V C
O D
O M C
D
D Derivatives/Hedging/Commitments/Contingencies
1 Verification of existence Verify the existence and ownership of recorded derivatives through confirmation X X X X
and ownership with the broker/dealer or counterparty or examination of evidence of ownership.
Confirm both settled and unsettled transactions with the broker/dealer or
counterparty. Request the inclusion of other information about the derivative,
such as whether there are any side agreements.
2 Detailed review of Review minutes, contract agreements, and confirmation replies for evidence and X X
minutes and other completeness of the existence of derivatives, of liens, pledges, or other security
evidence interests in derivatives; and of commitments to acquire or dispose of derivatives.
3 Inquiry for completeness Inquire about aspects of operating activities that might present risks hedged by X
of derivatives derivatives.
4 Identification of Identify any embedded or surprise derivatives not otherwise identified in steps 1 X
embedded or surprise to 3 above.
derivatives
5 Test of fair value of Test the fair value of derivatives and the appropriate recording in the financial X
derivatives statements.
6 Inquiry for completeness Inquire of management for complete listing of significant commitments, e.g., X X X
of significant purchase or sale contracts, fixed-priced or long-term agreements, service
commitments guarantees, insurance policies and determine whether or not disclosures need to
be made.
7 Identification of Review lawyers´ confirmations and other appropriate documents for significant X X X X X
significant contingencies contingencies and determine whether or not accruals need to be recorded and/or
disclosures need to be made.
E Equity
1 Equity reconciliation Obtain an equity reconciliation schedule, including retained earnings, agree to X X X
schedule general ledger accounts and test movements from prior year end to current year
end to ensure proper accounting for changes in equity, (e.g., profit distributions,
other equity reductions or increases) and determine completeness and
compliance with laws and regulations including taxation issues.
2 Minutes and equity Review board of director, shareholder and committee meeting minutes as well as X X
transactions changes to the articles of incorporation for issues affecting the financial
statements including the notes. If applicable, confirm all significant transactions
with a transfer agent or share registrar. Agree any changes in stock to the general
ledger.
3 Inquiry for stock option Inquire of management for any stock option agreements and determine X X X
agreements appropriate further audit procedures.
4 Appropriateness of Ensure that all dividend payments are appropriately approved and declared, and X
dividend payments that tax regulations have been followed.
7 Primary Substantive Procedures
RELEVANT ASSERTIONS
B/S P/L
R& P& P&
Index Title Significant Account and Primary Substantive Procedures E V C
O D
O M C
D
R Revenue / Sales
1 Overall analytical review Perform an overall analytical review for all significant income statement X X X
for significant income accounts and investigate in any significant changes or lack of expected changes,
statement accounts e.g. by means of computer-assisted audit techniques (CAAT). Ensure to include
those accounts not already covered through balance sheet account testing.
2 Revenue recognition Perform revenue recognition procedures (if not already covered by tests of X X X
procedures accounts receivables, trade and intercompany), for example, analytical
procedures using disaggregated data (e.g., by month, by product line, by
geographical area, by segment), inquiry of sales and marketing personnel for any
unusual transactions, or similar items, review of the terms of sales agreements -
including sales incentives- and client's policies for handling returns, to identify
potential unusual transactions or events.
OI Other Income
1 Contents of miscellaneous Understand contents of miscellaneous income accounts. Investigate significant X X X X
income unusual transactions, if not already covered by balance sheet account testings.
FI Finance Income
1 Interest and dividend Test interest and dividend income for significant investments or check X X X X
income reasonableness by comparing with the related investment balances.
2 Changes in value of Determine that changes in the value of investments is properly recorded in the X X
investments income statement, if applicable.
CS Cost of Sales
1 Comparison of cost of Obtain detail of Cost of Sales accounts in comparison with the prior period. X X X X
sales with prior period Investigate and explain major changes, large or unusual transactions, or the lack
of expected changes, if not already covered through analytical review of sales
accounts including gross-margin analysis.
2 Large and unusual Review the appropriateness of large and unusual expenses. X
expense review
PAY Payroll
1 Payroll analytics Compare the average pay per employee or hour to prior year including employee X X X X
benefits, if significant. Consider dis-aggregating to types of employees or by
location.
2 Pension expenses Test correctness of journal entries in connection with pensions and post- X X
retirement expenses, current payments and for changes in pension reserves.
8 Primary Substantive Procedures
RELEVANT ASSERTIONS
B/S P/L
R& P& P&
Index Title Significant Account and Primary Substantive Procedures E V C
O D
O M C
D
PPE Depreciation/Depletion/Amortization
1 See worksteps for PPE.
SD Selling and Distribution Expenses
1 Comparison of selling and Obtain detail of Selling and Distribution Expense accounts in comparison with X X X X
distribution expenses with the prior period. Investigate and explain major changes, large or unusual
prior period transactions, or the lack of expected changes.
2 Large and unusual Review the appropriateness of large and unusual expenses. X X
expense review
AD Administrative and Other Expenses
1 Contents of Understand contents of Administrative and Other expense accounts, e.g., in the X X X X
Administrative and Other areas of professional services fees, repairs and maintenance, leases and rents,
Expenses management compensation, political contributions and donations, and
miscellaneous. Compare with previous period and investigate any unusual
transactions.
2 Review of underlying For significant transactions identified in the previous step, review underlying X X X
documentation documentation for reasonableness and business purpose.
3 Completeness of lawyers' Verify through a review of lawyers fees that all lawyers and in-house legal X X
confirmations counsels, who handle significant litigation or other claims, have been covered in
the lawyers' confirmation work.
FE Finance Expenses
1 Interest Expenses Review the reasonableness of interest expense for significant loans by comparing X X X X
with the related loan balances.
2 Changes in value of Determine that changes in the value of investments is properly recorded in the X X
investments income statement.
IT Income and other Taxes
1 See worksteps for Income taxes, deferred taxes and related income statement
accounts.
2 Other taxes Review significant other taxes, e.g., property taxes, for correctness and proper X X X X
cutoff.
9 Primary Substantive Procedures
