ry Used by Auditor to Peoeseeatone YL fon] | Gnueciain ts) cose tere Otherwise_| Misstatements Account ]]|Transaction| balance > o}-8}H-]3 Hise PID} How These Assertion are checked? OR How SAAE is obatined wart these assertion External ] jcontirmation SA 505} mathematical accuracy independent |] execution of procedures“Employee benefit expenses actually Incurred dating the period in eapect lof employees of the entity ‘employee benefit expenses in respect ofall employees have Deen fully accounted for ‘expense has been calculated ‘ajustiments related to tedious et cetera have been Correctly made and accounted for [expense covectly cessifedasrwenve omens id; fear} Capes ints fo te crvotteccorntrapeovony J [resentation ana }_[Compary shal Giaclonire flowing Rights and Obligation [eut-orf Employee stock option purchase plan] [start wattare Inventory in the Balance sheet actually existed at the period end. “The inventory is owned or controlled by the entity. Check the purchase invoices are in the name of the client, ‘All inventory units held by entity should have en recorded and recognised appropriately in the financial statements Tnventory has been recognised at lower of cost Or NAV as per AS- 2 inventories Ensure year-end inventory balance excludes inventory elated to any other period. Pres ation and disclosure inventori classified aeSchedule itl r Companies Act Toc Basic Knowledge FAP. Top! SP Substantive Analytical Procedures internal Controt Audit Procedures to jobtain Audit evidence|] _|A-£!. 0. U Re-perform, EC faratwreyoo ]__[—tesrtan] Checkng?” | —[eonpanee enn (roar raceara) het documents | _[Pocunents, ioe GE) ee ee cron your cro Setece} [action Select a sample of assets from asset register and [Beanie] Hee] {aicrs ane ontigation}| —) inspect is invoice to verity ‘whether they were in the name of the Audit [asset Register, Invoice [Name]}—[obiective]]Aud 4) Reserues L Sunbras Racer — Amb Atibud out of Profit not fntented tO Any Otabiner of Reserve a Paurrue Cait Buunu — Profits Availabe for BumbuN OP fo ShaureKin or for following Rowore * — Diuisibu Profit + — Eetension + = wortuing, Codeine « — Finandas Pocinon Capitet Reerut = — wot free for Dishibutron = Dienitea Puxpore Erampcel = — Seawuhts Premium Cap take eRe 7 saad fos eke Guared through — tamital Prohk Goo be ultieeet for wiihng down — Fixtet Accor - jssusaf Bonus thas ( sonper to AOA) if faut: [to Previous year [compare}—{os of r/s| ee race moverent} fot} {Spivs Bete [Statement of [Trace movement} —{in]- 1 panges in equity] Shareholder] [Shares issved at Confirm Premium? } [Securities Premium Ensore}—JAPPlication of SP as [ensure] — | per Section 52BOARD MINUTES} —[review} —[poars rinvtes}—[For Approval} —[of new lending [Approved by 80D) {earee }}[Detaits} for toans recorded} —[with loan agreement.} eae | Pease] pe ne OT} = = = J} Date of redemption] In confirmation ask for all relevant information [ independent, } ‘compare balance as per [ROLL OUT balance Perform following confirmation confirmations ‘Ask for Re-conciliation, lf differences are there if difference is there test supporting document. [ST /17 Borrowings} [as per schedule to J} [general ledger] [Consider evidence of ‘additional debt after the end of ‘Transaction are recorde current period[Accounting policy ‘and method Loan balance to } Loan agreement pares} [Check closing exchange rate Verity ti |computation| [Consistenly applied] with AS II [Check compliance [Check loan classified POWERS OF THE COMPANY |-—within the borrowing ‘SECTION 180 COMPLIANCE VALUE of security as secured only as falls covered by market valve borrowings from ]|_[Ensure compliance with AS RELATED PARTIES 18 or IND AS 24 ‘amount borrowed is powers Restrictions on powers of Board ‘SECTION 185 COMPLIANCE. Loans to directors, etc ‘SECTION 186 COMPLIANCE Loan and investment by company ‘ACCEPTED DEPOSITS? |& www.edu9l.org Test of Control for checking effectiveness of control on sales To establish the || Audit procedure to EXISTENCE of trade Confirm Existence receivables as at the period- end oat Al Trade receivable balances that were supposed to be ae recorded have been Completeness recognized in the finan statements. Audit = Trade receivable balances rece have been VALUED Sutin appropriately. a Disclosure Required DISCLOSURE for 4 Requirements of |-— trade receivables have been Schedule Ill appropriately made ‘Only bona fide sales lead to trade receivables. Sales are made to approved customers Such sales are properly recorded ‘Once recorded, the debtors can be settled only by receipt of cash or on the authority of a responsible official. ‘After performing Test of Controls ‘Segregation of duties at every point in over sles, the ‘ auditor wil deci sales transaction. pon the audit ; rocedure to be Debtors are collected on time. : applied to verity debtors balance. In case debtors are not collected in time, sending reminders and taking legal actions if required. Balances are regularly reviewed. adequate provision for bad debt should be made by preparing adequate ageing schedule of the debtors.@ www.edu9l.org Invoice cannot be recorded more than once iControls| automatically recorded [general ledger receivable balances Period end accounts receivable ageing Trace the balance as || per report to general ledger Adjusted [chronological FIFO basis? report Invovice wise] Check recording of realisation ot her wise! Auditor should H Large bal. ‘Auditor ensures correct and proper sending of requests; returns (confirmations or undelivered letters) come to auditor. Control Control of Dispatch Discrepancies may affect accounts beyond initial sample. Discrepancies auditor verifies balances with subsequent cash receipts or conducts detailed transaction analysis. Review for collectability, authorization, and arm's length valuation. Ensure only sales/services receivables are included. Analyze sales and receivables trends; inquire about unusual trends and document findings.Match invoice and shipment dates to ensure correct period recording. Credit memo authorisation Return Analysis Discount policy’ Verify documented sales with goods still on-site. Look into high returns after the audit period for profit inflation signs. Check discounts/incentives against company policy. Review sample credit memos for proper approval. Allowance for Doubtful Examine the methodology for estimating doubtful Accounts Process accounts allowance. Provisioning Appropriateness Assess if the provisioning rates reflect realistic recoverability of receivables. Ageing Report Analysis | Litigation Debtor Review! Doubtful Debtors Identification Write-off Approvals authorized by a suitable authority, such as the Obtain and review accounts receivable ageing report, categorized by due periods. Compare current and previous year's list of debtors under litigation. Identify and discuss with management the exclusion of certain debtors from the bad debts provision. Conduct additional tests for any disputed amounts. Verify that receivables write-offs have been, Board of Directors.To establish the Existence of cash and cash equivalent balances as at the period balances that were supposed to be recorded have been recorded in the financial statements. ‘Cash and cash lequivalent balances have been VALUED appropriately Required DISCLOSURES for cash and cash equivalents have been appropriately made. Conduct unannounced cash balance verifications at and after year-end. Verity all cash balances at once if there are multiple cash handlers. Count cash in the cashier's Presence and have them sign the count statement.‘Compare rough Cash Book entries with the official Cash Book for accuracy. Ensure temporary advances (slips, chits, .0.U.s) are authorized and properly accounted for. ‘Compile monthly cash receipts and payments summary. [Analyze for unusual trends and seek explanations for variances. where cheques have become stale i.e. 3 months or more have lapsed since the issue date, the same should not appear in the BRS and should instead be [through bank deposit ]} slips and subsequent bank statements, Ensure adjustments for material amounts are made in the books. If not adjusted, consider implications for the audit report.Directly request banks to confirm account balances as of the audit, period end Instroct the company to address and clarify any dtferences with banks. ‘im for 100% | confirmation of bank balances If responses are not received, conduct Verification against bank in-person balance statements available to || confirmations at the bank ‘the company or through || with company personnel, ‘online access in the ‘auditor's presence.Existence [comietenee Tights and obigation)} [Valuation] 725] I Verify the physical presence of inventories at vear-end Ensure all entity-held inventories are recorded, ‘excluding third-party ‘owned but including those ‘owned but held by third parties. [Confirm the entity's ‘egal ownership of [check that inventories ‘are valued correctly according to accepted ‘accounting standards. inventories. [inventory Count Plan Review Examine the entity's inventory count strategy (Consigned Goods } Ensure consigned items Segregation are properly separated Participation in Count| Test Count (count Timinal}-— Observe adherence to the count plan and ensure proper supervision Be vigilant for empty boxes or obsolete items Conduct cut-off tests with recent receiving land shipping documents Confirm exclusion of third-party and ‘damaged or obsolete inventory Investigate significant discrepancies and have entity personnel sign off on count sheets and variances For periodic systems, count at period end; for perpetual systems with adequate records, interim counts are acceptable Verity inventory held by Third-Party Inventory third parties, especially Confirmation for job work in production processes. Verify accurate inventory disclosures in financial statements.@ www.edu9l.org Apply comparison tests using industry averages, previous years, and budgets. Analytical Procedures Calculate inventory turnover ratio and perform vertical analysis. ‘Non-Financial Check weights and measurements of Information Review inventory. ‘Trace shipping and receiving documents Cut-off Tests around year-end to ensure proper recording, [Fnentory WL Teaged inventory Test for omitted and invalid E Verification transactions in tagged inventory. Inventory Listing Confirm the arithmetic accuracy of Accuracy inventory records. Physical vs. Records Match physical inventory counts Reconciliation to perpetual inventory records. Reconcile client-owned inventories held at third-party locations. Third-Party Inventory Reconciliation Ensure consigned inventory is accurately separated from owned inventory. Consigned Goods Segregation i@ www.edu9l.org Match purchase records to = supporting documents Document: Vouceing (requisitions, orders, receipts, invoices, payment proofs). ‘Consigned Goods |} ‘Assess consigned inventory to Evaluation differentiate from owned inventor Review client correspondence and records related to sales, receivables, and purchases. Document Examination’ Identify and evaluate any Collateral Agreements collateral agreements impacting ‘ownership. : Examine agreements to deeeteiaedon understand terms related to inventory consignment. : Check invoices for client's name as Invoice Verification’ ier oP OUARHIR: Obtain confirmations for significant inventory items as outlined in auditing standards. Inventory Confirmations Secure written confirmations from third 7 parties holding client inventory, Thi: Rerty Declarations verifying ownership and terms of holding.h Www.edu9l.org Valuation Method] Depending on how the business operates, the management may value inventory using First-in- first-out (FIFO) or weighted average basis. The audit team reviews current market prices for cotton and synthetic fibers (Inventory). If Cost vs. Replacement replacement costs are significantly lower than recorded costs, it may indicate the need for Price List Review Turnover Ratio) ‘Manufacturing Costs| Cost or NRV Application. inventory write-downs to reflect market Reviewing recent vendor price lists helps verify that the costs recorded for inventory purchases are in line with current market prices, ensuring the inventory is not valued higher than the market rate. Analyse turnover to spot obsolete wentory Check that overhead allocations include only direct labor, materials, and overhead. Confirm inventory is valved at the lower of cost or net realizable valve.Cost Elements Identification [Determine which costs are included (e.9., carriage, duties, consumables). [Standard Costs Review| Invoice Verification Damaged/Obsolete inventory [Understand the basis for comparison with actual standard costs, costs, and variance ‘treatment. (Cross-check cost prices with purchase invoices from months before the count. Evaluate damaged or obsolete items for realistic net realizable value Production Stage Measurement (Cost Elements and Overheads (Material Costs Verification Determine measurement ‘methods for production stages or value ad including the basis for estimates, Identify included cost elements. For overheads, verity the allocation basis and compare it with entity's costing and, financial data ‘Check that material costs do not include abnormal wastage. [Overhead Costs inauiry| Determine Net Realizable Valve Assessment [Obsolete and Damaged Inventory Review Damage and Obsolescence Follow-Up included costs and their basis. Value inventory at NAV if lower than cost, including WIP and raw materials Identity and evaluate realizable value for obsolete, damaged, or slow-moving items. Request an inventory ‘age analysis to aid in valuation. ‘Check again the items identitied as damaged or obsolete during the physical count for valuation adjustments.‘Abnormal amounts Storage cost] Selling and distribution [abnormal amounts of wasted materials, labour, or other production costs Unless those costs are necessary in the production process [Administrative overheads [that do not contribute ‘to bringing the inventories to their present location and condition cost. prior toa further production stage (Obtain Contirmation| inquire Necessity for Retaining inventory [Special Attention to lof inventory quantities by third parties. For Writing off purpose Long-held Goods Review Movement Records (Documents) [Valuation of inventories! Evaluate Condition of Goods Ensure inventory valuation includes material costs and proportionate processing ‘charges correctly. Verify if goods were Check Disposition of Goods sold or returned after @ Inventory Ensure inclusion in Closing set period.‘The auditor verifies the accounts sales submitted by the consignee, which detail the goods sold and the inventory of goods still on hand The auditor reconciles the figure of the goods on hand, as reported in the last accounts sales, with Proforma invoices and accounts sales received during the year lof consigned goods as of the balance sheet date. Verify agreement terms for commissions/expenses and ensure accurate in accounts Confirm consignee goods are valued at cost plus relevant expenses or at net realizable valve if lower, accounting for damaged/obsolete items. Ensure consigned goods are listed separately in inventories.Probable that future ‘economic benefits associated with the item ‘will flow to the enterprise cost of the item can be measured reliably. —_— IF qualifies for should be measured at recognition 's cost Directly attibutable Kt costs (Crom the book [Not costs for an item of PPE Verify physical | [Basten presence of FFE at year end. Confirm all PPE additions are recorded, excluding third-party assets but including those controlled by the entity but held elsewhere, ‘Check PPE valuation lcomplies with accepted accounting standards. Ensure the entity has, legal ownership of recorded PPE. Verity PPE disclosures meet reporting requirements.Examine the entity's plan for PPE physical Focussing on who performs it and when. Check for evidence of appropriate supervision during PPE verification. Reconcitiation| Obtain Discrepancies Tag and Ensure all PPE items are Indenfication |] _ properly tagged and mark identified, Match physically verified PPE items with tthe fixed asset register. Review discrepancies found during verification and how they're reflected in the entity's records and financial statements.Check management's PPE schedule: Opening balance + ‘Additions - Deletions = Closing balance, and match closing balance with the books. ‘Confirm the mathematical correctness of the PPE movement schedule. Match opening balances with prior year's audited financial statements. ‘ensure expenditures quality ‘as PPE under relevant accounting standards. (AS 10) Verify day-to-day servicing costs are not capitalized as PPE. Check purchase invoices, installation reports, etc., to verify addition dates for sampled PPE, Confirm additions have been approved by authorized personnel. Review internal procurement procedures (quotations, tenders) for PPE acquisitions or capital projects. Understand reasons and procedures, for PPE deletions and disposals. Examine the process followed for selling discarded PPE. Examine the process followed for selling discarded PPE. Ensure accurate recording of deletions, including any profits or losses on disposals.Verify management has assessed PPE for impairment in accordance with AS 28 requirements. Ensure depreciation is Confirm the charged on all depreciation method depreciable PPE items, aligns with the excluding expected pattern of nondepreciable assets economic benefits like freehold land. consumption. Check purchase invoices are in the entity's name, confirming legal ownership. Review conveyance/sale deeds for new land and building acquisitions to verify legal ownership. Confirm original title deeds are held for all immovable properties as of the balance sheet date. If immovable property is collateral for loans and original deeds are with lenders, obtain lender confirmation that they hold the deeds as security. Review the register of charges to ensure any encumbrances against PPE are properly recorded,Classification of liabilities Existence From Book Verify the presence of trade payables and other current liabilities at year-end. irect confirmation procedure Completeness Confirm all expected trade payables and liabilities are recorded in the financial statements. Valued Presentation disclosure ‘Check the accurate valuation of trade payables and other liabilities. Ensure disclosures for trade payables and other liabilities are correctly made in the financial Ageing Report Prevent Duplicate Recording Obtain the accounts payable aging report and trace balances back to the general statements. Verify controls to prevent duplicate recording of purchase/expense invoices. ensure payable balances are [estomatil} —| automaticaly recorded in the general ledger Control ledger. Reconciliation IK Investigate and reconcile any discrepancies between the aging report and the general ledger. Journal Entry] Review journal entries, especially large transactions, for accuracy and proper recording,www.edu9l.org Contact vendors directly to confirm account payable ‘amounts, r[endor focusing on significant balances and material purchases during the audit period. Perform direct confirmations with the audited entity's consent. Entity Consent]-— Evaluate the validity of management requests to exclude certain payables from confirmation, Management Exceptions. Request confirmations for balances as of the 1 __|balance sheet date or a close alternative, Idecided in consultation with the company. n ti —7_[ Usea blank form for vendors to fill in their balance, (Preferred) [Confirmation form] or’ ‘A Form Stating Year end balance for agreement L[ selection Do not disclose creditor selection [confidentiality criteria to the company. Either have the entity prepare request letters for auditor-selected creditors or J \eswest letter trp) have the auditor directly send authorized letters. Ensure accurate and proper sending of [Dispatch Controt requests, with returns directed to the auditor, not the client. For non-replies, conduct further tests such as, verifying subsequent payments, matching balances with invoices, and detailed analysis of balances for authenticity. [Authorisation| fatateapary} faccens] + ransaction vate Follow up|Cut off | 4 Test Purchase sample Invoice and Gate Entry ensure purchases are recorded in the Match period. Check expenses recorded after Paper ce cee a the balance sheet date for any relating to the audit period Advance Received from Customers Create Reasonability Statements Catculat PF Checks: IK expenses, Challan| All goods received prior to the period/ year- end should have been booked as purchases Check challans for deposits made after the period-end |] against recorded liabilities. Discuss any discrepancies with management. Compile all statutory dues for compliance with [eAnor'2020 reporting requirements, like CARO, 2020. and included in trade creditors. Sample test purchases from pavable ledgers for correct amounts and dates. Match invoice and gate entry dates to right period, including post-period invoices that belong to the audited Obtain a detailed listing of advances received, including aging and nature. Identify any advances outstanding for over 6 months, Long-Term Advances Review ‘Compare expected vs. recorded liabilities for taxes and contributions (TDS, GST, etc.) based on relevant transactions. fe expected Provident Fund based on employee , respectively. Investigate any differences from the entity's records.Write Back Process| Authorization of Write: Backs: Document Foreign Currency Restatement Dispute And Litigation Examine the company's method for identifying liabilities that may need to be written back, ensuring consistency with previous years and suitability for the current business contex Verify that liability write-backs deemed no longer payable have been authorized by a senior management member (e.g., CEO/MD). JObtain an ageing report of payable balances [Ageing Report. categorized by age groups to identity old liabilities. Acquire a list of vendors with disputes and customer claims under litigation, comparing it with the prior year. List Ensure foreign currency payables have been accurately restated according to applicable MSME Dues Assessment } accounting standards. + Understand Management's Process Test Process Reliability: Learn how management [Assess accuracy through sample verification.