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E&Y Global Audit Methodology and Supplemental Audit

Guidance
Workflow EY Global Audit Methodology
Strategy and Risk Assessment
S11 Design Substantive Audit Procedures
S11_Exhibit 1 Nature, Timing, and
Extent of Substantive Procedures
Appendix A: Primary
Substantive Procedures (PSP)
by Account [S11_Exhibit 1]

Appendix A: Primary Substantive Procedures

(PSP) by Account [S11_Exhibit 1]
A s w e a r e d e sig nin g o u r a u dit p roc e d ur es, co n sid e r t h e fa ct t h a t w e p erfor m
Pri m a r y S u bst a n ti v e Proc e d u r e s (PS P) o n a ll a u dit e n g a g e m e n ts for a ll
si g nific a n t a cco u n ts, re g a r dle ss of t h e co m bin e d ris k a ss e ss m e n t s.
T h e PSPs w it hin t his A p p e n di x a r e a p plic a bl e t o a ll in d u st ri e s a n d fin a n cia l
r e por tin g fr a m e w or k s a n d ar e b a s e d o n a st a n d a r diz e d s e t of sig nifica n t
a cco u n ts, w hic h inclu d e s a st a n d a r d n a m in g co n v e n tio n a n d t h e glo b a l w or kin g
p a p e r in d e x (for e x a m pl e , C : C as h , in clu din g b a n k b a l a n ce s) . T h e s e PSPs a r e
r e f e rr e d t o as st a n d a r d PSPs. F or a u dit e n g a g e m e n ts in c er t a in in d u str y s e ct ors,
a d ditio n al PSPs a r e r e q uir e d fo r st a n d a r diz e d sig nific a n t a cco u n ts a n d / o r s e ct o r sp e cific sig nifica n t acco u n ts. T h e s e a d ditio n al s e ct or PSPs a re in clu d e d in
A p p e n dix A 1 : S e ct or Pri m a r y S u b st a n tiv e Proc e d u re s (PSPs ) b y Acco u n t
[ S 1 1 _ E x hibit 1 ] . E a c h PSP in clu d es a titl e th a t d e scrib e s t h e o bj e cti v e of t h e
p roce d u re . I n a dditio n , t h e m ost r e l e v a n t a ss e r tio n s h a v e b e e n in dica t e d for
e ac h of t h e r e sp ectiv e p roce d ur es.
PSPs d e scrib e t h e n a t ur e of t h e p roc e d ur e s t o b e p e rfor m e d . A s p a r t of t h e
d e v elo p m e n t of o u r a u dit p roc e d u re s , w e a lso i nclu d e t h e ti m i n g a n d e x t e n t of
t h e PSPs. H o w e v e r , t h e ti m in g a n d e x t e n t of t h e p ri m a r y p roc e d u r es p e rfor m e d
w ill b e a ff ect e d b y o u r co m bin e d ris k a ss e ss m e n ts. S o m e of t h e p ri m a r y
p roce d u re s m a y b e p e rfor m e d a s t ests of co n trols a s w e ll a s s u bst a n tiv e
p roce d u re s ( k n o w n a s d u a l- p ur pos e t e st s) .
PSPs o n t h e ir o w n w ill n o t n e ce ss a ril y p ro vid e a ll of t h e a u dit e vid e nc e w e n e e d
o n a p a r tic ul a r ass e r tio n fo r a sig nifica n t a cco u n t. T h e r efor e , o u r a u dit
p r oce d u re s also in clu d e o t h e r s u b st a n ti v e p r oce d u re s w e b e li e v e a re n e ce ss a r y
t o a p p ro pri a t e l y r e sp o n d to o u r co m bin e d ris k a ss e ss m e n t . I n a dditio n , w h e n
d e v e lopin g o u r a u dit p roce d u re s, w e con sid e r t h e a p plic a bilit y o f Illu st r a ti v e
S u bst a n tiv e Proc e d ur es ( I SPs) w hic h a re a v a il a bl e for b o t h st a n d a r d a n d
s e ct or-sp e cific sig nific a n t a cco u n ts. S e ctor I SPs inclu d e s u p pl e m e n t a l w or kst e ps
s p e cific a lly d e sig n e d t o a ssist in t h e e x e c u tio n of st a n d a r d a n d s e ct or PSPs in
c e r t a in in d u str y s e ct ors.

Summary of procedures
Pri m a r y s u bst a n ti v e
p r oce d u r e s (PSPs )

Standard
Re q uir e d fo r a ll
e n g a g e m e n ts r e g a r dle ss
of in d u str y se ct or a n d
ris k a sse ss m e n t fo r t h e
acco u n ts id e n tifi e d a s
sig nific a n t .

Sector
R e q uire d fo r e n g a g e m e n ts in t h e
in d u st r y s ect or o nl y for t h e
a cco u n ts id e n tifi e d as sig nifica n t
r e g a r dl e ss of ris k a sse ss m e n t .

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Illu st r a ti v e
s u bs t a n tiv e
p r oce d u re s ( I SPs )

Illu st r a tiv e ( n o t
r e q uir e d ) for a ll
e n g a g e m e n ts r e g a r dle ss
of in d u str y se ct or for
[N O TE : St a ndard
acco u n ts id e n tifi e d a s
I SPs a r e a v a il a bl e in
sig nific a n t .
C h a pt e r 5 of t h e
G lo b al S u p ple m e n t al C e r t a in I SPs a r e
A u dit M a n u al]
a p plic a bl e r e g a r dl e ss of
ris k a sse ss m e n t a n d
o th e rs a r e a p plic a bl e in
r es po ns e t o c e r t ain ris k
ass ess m e n t s .

Page 2 of 23

Illu st r a ti v e ( n o t r e q uir e d ) for

e n g a g e m e n ts in t h e in d us tr y
se ct or o nl y for t h e a cco u n ts
id e n tifi e d a s sig nifica n t ,
r e g a r dl e ss of ris k a sse ss m e n t .
C e r t ain I SPs a r e d e sig n e d t o b e
illu st r a ti v e w or kst e ps t o cl a rif y
h o w c e r t a in PSPs a re g e n e r all y
e x e c u t e d for a n in d u str y s e ct or .
F or co n v e nie nc e , e ach w or k st e p
h a s b e e n r ef e r e nc e d t o its
a pplic a bl e PSP.

* Balance Sheet and Profit Loss Legend

Balance Sheet (B/S)
E = E x ist e nce
V = V a lu a tio n
C = C o m p l e t e n e ss
R&O = Rig h ts & O blig a tio ns
P& D = Pr e s e n t a tio n a n d D isclos ur e

Profit Loss (P/L)

O = O cc u rr e n c e
M = Me as u r e m e n t
C = C o m p l e t e n e ss
P& D = Pr e s e n t a tio n a n d D isclos ur e

RELEVANT ASSERTIONS*
B/S
Index Significant Account and Primary
Substantive Procedures
C

Cash, including Bank Balances

B a n k co nfir m a tio ns :

P/L

E V C R&O P&D O M C P&D

X X X

O b t a in a co m pl e t e list of b a n k
acco u n ts ( d e bit a n d cr e dit b a l a nce s )
as w e ll as r el a t e d lo a n a n d si m ila r
co n t r a cts. O b t a in , a t a m ini m u m ,
b a n k co n fir m a tio n s for a ll m a jor
d e p osit o r y a n d disb u rs e m e n t
acc o u n ts, a n d b a n k acc o u n ts clos e d
d u rin g t h e y e a r a n d o t h e r a cco u n ts
as a p p rop ria t e , b a s e d o n t h e n a tu r e
of t h e acco u n ts ( e . g . , w e m a y
d e cid e n o t t o co nfir m so m e i m p r e st
b a n k a cco u n ts, p a ss - t h ro u g h b a n k
acc o u n ts, or n o n - o p e ra tin g b a n k
acco u n ts wit h li mit e d activ it y ) to

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co nfir m t h e r ela tio ns hip wit h t h e

b a n k inclu d in g co n tin g e ncie s, lie ns ,
pl e dg e s, r es tric tio ns o n t h e cli e n t's
ass e ts, g u a r a n t e e d a m o u n ts e tc.
D ocu m e n t in t h e w or k p a p e rs t h e
r a tio n a l e for t h e s el e ctio n of b a n k
acc o u n ts for co nfir m a tio n .
2

B a n k r e co ncilia tio ns :

X X X

E x a m in e t h e clie n t's b a n k
r eco n cili a tio n a s of y e a r e n d,
inclu din g c a sh -in - t r a n sit a cco u n ts ,
( e . g . i n s u bl e d g ers) t o v e rif y t h e
pro p e r r e con cili a tio n of b a n k
st a t e m e n ts a n d g e n er a l l e d g e r
acco u n ts .
3

C a s h cu t off :

T e st c u t off of ca s h r ec e ip ts a n d c a s h
dis b u rs e m e n ts fo r tr a nsfe rs
b e t w e e n diff e r e n t b a n k a cco u n ts a t
t h e b al a n c e s h e e t d a t e .
4

C a sh v alu a tio n :

T e st a p p ro pri a t e v a lu a tio n of c a sh
a n d c ash e q uiv ale n ts (inclu din g
o v e r dr a fts) in for eig n cu rr e n ci e s.

RELEVANT ASSERTIONS*
Index Significant Account and Primary
Substantive Procedures
D

Marketable Securities

V e rific a tio n of e xist e nc e a n d

o w n e rs hip :

B/S

P/L

E V C R&O P&D

O M C P&D

V e rif y t h e e xist e nc e a n d o w n e rsh ip

of r ecor d e d se c u riti e s t h ro u g h
co n fir m a tio n or e x a min a tio n of
e vid e n c e of o w n e rs hip ( e . g ., st ock
c e r tific a t e s, b a n k st a t e m e n ts,
b r o k e r s t a t e m e n ts ) .
2

D e t ail e d co n fir m a tio n r e vi e w :

R e v ie w co n fir m a tio n r e pli e s fo r

e vid e n c e of t h e e x ist e n c e of
m a r k e t a bl e s e cu riti e s, a n d o f li e n s,
pl e d g e s o r o t h e r s e cu rit y in t e r ests
in m a r k e t a bl e s e cu ritie s.
3

Ma r k e t v a lu a tio n :

I n sp e ct m a r k e t q u ot a tio ns o r ot h e r
e vid e n c e of c u rr e n t v a lu e of
m a r k e t a bl e s e cu riti e s, in clu din g
t h os e in fo rei g n cu rr e ncie s.
4

V a lu a tio n in a cco r d a n c e w it h
a cco u n tin g p olici e s :

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T e st t h a t m ar k e t a bl e s e cu riti e s ar e
c a rri e d in a ccor d a n c e w ith t h e
clie n t's a cco u n tin g p olici es o r
a pplic a bl e fin a nci a l r e p o r tin g
fr a m e w or k .
5

R ecl assific a tio n b e t w e e n t r a din g

a n d in v es t m e n t p o rtfolios :

X X

I nsp e ct d ocu m e n t a tio n a n d m a k e

in q uiri e s t o d e t e r m in e t h e v alidit y
a n d e x t e n t of r ecl a ssifica tio n
b e t w e e n c a t e g o ri e s of in v es t m e n t s .
B y re f e r e n c e t o t h e cli e n t's
a cco u n tin g p olici e s o r a pplic a bl e
fin a n ci a l r e p or tin g fr a m e w or k ,
e v a lu at e t h e r ecl assific a tio n t o
d e t e r m in e its e ff ect o n : 1 )
r e cog nitio n of p rofit or loss, 2 ) t h e
st a t e d in t e n t a n d a bilit y , a n d 3 ) t h e
cl assific a tio n of ot h e r in v e st m e n ts.

RELEVANT ASSERTIONS*
Index Significant Account and Primary
Substantive Procedures
E

Accounts Receivable trade

A g r e e m e n t of su bl e d g e r wit h
g e n er a l l e d g e r :

B/S

P/L

E V C R&O P&D

O M C P&D

A g r e e r e ce i v a bl e s s u bl e d g e r to t h e
g e n e r a l l e d g e r co n t rol a cco u n t a n d
in v e stig a t e la rg e a n d u n us u al
r e co ncilin g it e m s.
2

C o nfir m a tio ns a n d su bs e q u e n t c a s h
r e c eip ts :

X X

V e rif y t h e e x ist e n ce of a cco u n ts

r e c ei v a bl e t r a d e t hr o u g h
co n fir m a tio n , e x a m in a tio n of
su b s e q u e n t c a s h r e c eip ts, or o t h e r
a lt e r n a tiv e p roce d u r es, a s
a p p ro p ri a t e . C o nsid e r u sin g t h e
a u dit ris k t a bl es or EY Micro S TA RT
t o d e t e r m i n e t h e e x t e n t of t h e
s a m pl e or d ocu m e n t t h e r a tio n a l e
for t h e s a m pl e s e l e ctio n in t h e
w or k p a p e rs.
3

Rollfor w a r d p roce d u re s :

X X X

I f a cco u n ts a r e v e rifi e d a t a n
in t e ri m d a t e , re v i e w t h e rollfo r w a r d
of a cti vit y fro m t h e in t e ri m d a t e t o
t h e b ala nc e sh e e t d a t e in a m a n n e r
r e sp o nsi v e to o ur co m bin e d ris k
a sse ss m e n t a n d co m p a r e l e v e l of
a cti v it y w it h p rior p e rio ds.

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I n v e stig a t e u n usu al it e m s ; co nsid e r

co n fir min g ( a t t h e b a la n c e s h e e t
d a t e ) sig nific a n t n e w a cco u n ts a n d
t h os e a cco u n ts wit h sig nific a n t
in cr e a s es o r d e cr e a se s b e t w e e n th e
in t e ri m d a t e a n d t h e b a l a n ce s h e e t
d a te.
4

A cco u n ts r ec e iv a bl e cu t off :

Pe rfor m a n a ly tic a l p roc e d u r es t o

id e n tif y p e a k s in s al e s v olu m e in
t h e l a st f e w d a ys or w e e ks of t h e
y e a r a n d t e st cu t off b y in sp ectin g
s a l es r e gist e r, billin g s, s hip pin g
d oc u m e n ts a n d o t h e r su p p orti n g
d oc u m e n ts b e for e a n d a ft e r t h e
y e a r- e n d d a t e . W h e r e w e p e rfor m
s u b st a n ti v e p r oce d u re s a t a n
in t e ri m d a t e , w e p e rfo r m c u t off
t e stin g a t t h a t d a t e a lso .
5

Allo w a nc e for d o u b tful a cco u n t s :

E v al u a t e t h e a d e q u a c y of t h e
a llo w a nc e for d o u btf ul acco u n ts,
inclu din g t h e a p p ro p ri a t e n e ss of t h e
m e t h od olo g y u se d to c alc ula t e t h e
a llo w a n c e .
6

O t h e r a d j ust m e n t s t o acc o u n ts
r e c ei v a bl e :
E v al u a t e t h e a d e q u a c y of o t h e r
a d j u st m e n ts t o a cco u n ts
r e c ei v a bl es , s u ch a s r e b a t e s, cr e dit
m e m os , disco u n ts .

A ccou n ts r ec e iv a bl e in for e ign

c u rr e n ci e s :
T e st a p p ro p ri a t e v a lu a tio n of
a cco u n ts r ec ei v a bl es in fo r eig n
c u rr e n ci e s.

C r e dit b ala nc e s a n d u n us u al it e m s :

I n q uir e a b o u t or r e vi e w t h e list of
cr e dit b a l a n ce s a n d in v e stig a t e
l a r g e it e m s.

RELEVANT ASSERTIONS*
Index Significant Account and Primary
Substantive Procedures
F

Inventories

O bs e r v a tio n of p h y sic a l in v e n t ori e s :

B/S

P/L

E V C R&O P&D

O M C P&D

X X X

O bs e r v e t h e t a kin g of p h y sic al
in v e n t ori e s. V e rify t h a t cli e n t co u n t
in str u ctio n s a r e follo w e d a n d t h a t
in v e n t ori e s o w n e d b y ot h e rs a r e

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s e p a r a t e d . Pe rfor m a p pro p ri a t e t e st
co u n t s a n d tr a c e t e s t co u n ts t o t h e
in v e n t or y co m pil a tio n .
2

C o n fir m a tion of in v e n t ori e s h eld b y

o t h e rs :

I f sig nific a n t , co nfir m i n v e n t orie s

h el d b y o t h e rs a t t h e p h y sic al
in v e n t o r y d a t e a n d t ra c e co n fir m e d
q u a n titi e s t o t h e in v e n t or y
co m pil a tio n ; c o nsid e r o bs e r vin g
t h e se p h y sic a l in v e n t ori es a s w e ll.
3

R e co ncilia tio n of in v e n t or y
co m pil a tion wit h g e n e r al l e d g e r :

X X

R e vi e w t h e r eco n cili a tio n of t h e

v alu e d p h y sic al in v e n t or y
co m pila tio n wit h t h e g e n e r al le d g e r
a cco u n t b ala nc e s a n d t h e p e r p e t u al
in v e n t or y r e cor d s. I n v estig a t e l a rg e
a n d u n usu al r e co ncilin g it e m s.
4

Rollfo rw a rd p r oce d u r e s :

X X

I f in v e n tori e s a r e t a k e n a t a n
in t e ri m d a t e , r e vi e w t h e rollfo r w a r d
d oc u m e n t a tio n in a m a n n e r
r e sp o nsi v e t o o u r co m bin e d ris k
a ss e ss m e n t a n d in v e s tig a t e u n usu al
it e m s.
5

I n v e n t o r y cu t off :

T r a c e t h e cu t off in for m a tio n

o b t ain e d d u ri n g t h e p h y sic a l
o bs e r v a tio n t o t h e a cco u n tin g
r e co rd s of s al es a n d p urch a s es .
6

V a lu a tio n in a cco r d a n c e wit h

a cco u n tin g p olicie s :

T e st t h e v alu a tio n of i n v e n t or y t o
v e rif y t h a t it is p e rfor m e d in
a ccor d a nc e wit h t h e clie n t's
a cco u n tin g p olicie s o r a p plic a bl e
fin a n cia l r e p or tin g fr a m e w or k .
7

N e t r e a liz a bl e v a lu e t e stin g :

T es t t h e allo w a nc es t o r e d uce t h e
v alu a tio n of in v e n t or y t o n e t
r e a liz a bl e v alu e , e . g . , r e se r v e s fo r
slo w m o vin g it e m s , o b sol e sc e n ce o r
lo w e r of cost or m a r k e t.

RELEVANT ASSERTIONS*
Index Significant Account and Primary
Substantive Procedures
G

B/S

P/L

E V C R&O P&D

O M C P&D

Prepaid expenses, deferred

charges and other assets

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V erifica tio n of e xist e n c e a n d

v a lu a tio n :

Page 7 of 23

X X X

V erif y e xist e n ce a n d c a rr yin g

a m o u n t s t h ro u g h e x a m in a tio n of
su p p ortin g d ocu m e n t s, or
co n fir m a tio n or a co m bin a tio n of
t h os e p roce d u r es.

RELEVANT ASSERTIONS*
Index Significant Account and Primary
Substantive Procedures
H

Investments, including
investments in affiliates

V e rific a tio n of e xist e nc e a n d

o w n e rs hip :

B/S

P/L

E V C R&O P&D

O M C P&D

X X X

V e rif y t h e e xist e nc e a n d o w n e rsh ip

of r e cor d e d i n v e st m e n ts, inclu din g
t h ose in affili a t e s, t h ro u g h
co n fir m a tio n or e x a min a tio n of
e vid e n c e of o w n ers hip. I n v estig a t e
u n usu a l it e m s.
2

D e t ail e d m in u t e s r e vi e w :
R e v ie w m in u t e s (s h a r e h old e rs,
b o ar d , e x e c u ti v e co m m it t e e , e tc. ),
a gr e e m e n ts a n d co n fir m a tio n
r e pli es for e v id e nce of e x ist e n ce ,
li e n s , pl e d g es o r o th e r se cu rit y
in t e r e sts in in v e st m e n ts ; a n d of
co m m it m e n ts t o a cq uir e or disp ose
of i n v e st m e n t s.

V a lu a tio n in a cco r d a n c e w it h
a cco u n tin g p olici e s :

I n sp e ct m a r k e t q u ot a tio n s, fin a n ci a l
st a t e m e n ts of in v est e es a n d o t h e r
e vid e n c e of c u rr e n t v a lu e , cost or
e q uit y a m o u n t of i n v e st m e n t s a n d
t e st t h a t in v e st m e n ts a r e c a rri e d in
a ccor d a nc e wit h t h e cli e n ts
a cco u n tin g p olici e s o r a pplic a bl e
fin a n ci a l r e p or tin g fr a m e w or k
inclu din g for eig n cu rr e nc y
t r a n sl a tio ns .
4

I m p a ir m e n t t estin g :
Us e infor m a tio n o b t ain e d d u ri n g t h e
a u dit i n d e t e r m inin g w h e t h e r
m a n a g e m e n t h a s id e n t ifi e d
a p p ro p ria t e in dica t ors of
i m p a ir m e n t a n d v e rif y t h a t
a pp r o p ria t e a d j u st m e n ts a re m a d e
in a cco r d a n c e w it h t h e a p plic a bl e
fin a n ci a l r e p or tin g fr a m e w or k .

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R ecl assific a tio n b e t w e e n t r a din g

a n d in v es t m e n t p o rtfolios :

X X

I nsp e ct d ocu m e n t a tio n a n d m a k e

in q uiri e s t o d e t e r m in e t h e v alidit y
a n d e x t e n t of r ecl a ssifica tio n
b e t w e e n c a t e g o ri e s of in v es t m e n t s .
B y re f e r e n c e t o t h e cli e n t's
a cco u n tin g p olici e s o r a pplic a bl e
fin a n ci a l r e p or tin g fr a m e w or k ,
e v a lu at e t h e r ecl assific a tio n t o
d e t e r m in e its e ff ect o n : 1 )
r e cog nitio n of p rofit or loss, 2 ) t h e
st a t e d in t e n t a n d a bilit y , a n d 3 ) t h e
cl assific a tio n of ot h e r in v e st m e n ts.

RELEVANT ASSERTIONS*
Index Significant Account and Primary
Substantive Procedures
I

Intercompany balances and

transactions

V erifica tio n of in t e rco m p a n y

acco u n t b a l a n c e s :

B/S

P/L

E V C R&O P&D

O M C P&D

X X X

O bt a in a co m pl e t e list of a ffilia t e d
co m p a ni e s a n d o bt a in co n fir m a tio n
of r e c e i v a bl e s fro m a n d p a y a bl es t o
affili a t e s, or a g r e e t h e a cco u n t
b a l a n ce s w it h t h os e in th e a ffili a t e s'
r eco rds .
2

V alu a tio n of in t e rco m p a n y

acco u n ts :

T e st t h e c a rr yin g a m o u n ts of
in t e rco m p a n y a cco u n ts, inclu din g
t h os e in fo r e ig n c urr e n ci es .
3

I n t e rco m p a n y a cco u n ts cu t off :

T e st c u t off b y in sp ecti n g s a le s
r e gist e r , billin gs, s hip pin g
docu m e n t s a n d o t h e r su p p orti n g
doc u m e n ts b efor e a n d a ft e r t h e
ye ar e nd d a te .
4

Allo w a nc e for d o u b tful

in t e rco m p a n y re c ei v a bl es :

E v a lu a t e t h e a d e q u a c y of t h e
allo w a nc e for d o u b tful
in t e rco m p a n y re c ei v a bl es
co nsid e ri n g t h e a gin g a n d fin din gs
fro m a u dit p roc e d ur e s p erfor m e d in
t h e a re a of in v es t m e n ts .

RELEVANT ASSERTIONS*

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Index Significant Account and Primary

Substantive Procedures
J

Long-term receivables, noncurrent deposits, and other

long-term financial assets

V erific a tio n of e x ist e n c e a n d

o w n e rship :

Page 9 of 23

B/S

P/L

E V C R&O P&D

O M C P&D

X X X

V erif y t h e e xist e n c e a n d o w n e rship

of lo n g - t e r m r ec ei v a bl es t h ro u g h
co nfir m a tio n or e x a m in a tio n of
su p p ortin g d ocu m e n t a tio n .
2

V alu a tio n of lo n g - t er m fin a nci al

a ss e t s :

T e st t h e c a rr yin g a m o u n ts o f lo n g t e r m fin a n ci a l a ss e ts.

3

I m p air m e n t t e stin g :

Us e i nfor m a tio n o b t ain e d d u ri n g t h e

a u dit in d e t e r m inin g w h e t h e r
m a n a g e m e n t h as i d e n tifie d
a p p ro pri a t e in dic a t ors of
i m p a ir m e n t a n d v e rif y t h a t
a pp r o pri a t e a d j ust m e n ts a r e m a d e
in acco rd a n c e wit h t h e a pplic a bl e
fin a n ci a l r e p o rtin g fr a m e w o rk .

RELEVANT ASSERTIONS*
Index Significant Account and Primary
Substantive Procedures
K

Property, plant and equipment

and related income statement
accounts

A gr e e m e n t of s u bl e d g e rs w it h
g e n e ra l l e d g e r :

B/S

P/L

E V C R&O P&D

O M C P&D

X X X

X X

O bt a in a sc h e d ul e of p ro p e r t y , pl a n t
a n d e q uip m e n t , inclu di n g
ca pit a liz e d le a se s, a n d r e l a t e d
a d ditio ns, disp osa ls,
r ecl assific a tio n s a n d d e p r eci a tio n ,
d e p le t io n a n d / or a m ortiz a tio n (PPE
su bl e d g e r ) a n d a g r e e b a l a nc es t o
t h e r es p ec ti v e g e n e r a l l e dg e r
acco u n ts .
2

A dditio ns a n d disp os a ls :

X X X

Fo r signific a n t a dditio ns (in clu din g

ca pit a liz e d l a b or , b o rr o win g costs
a n d o t h er a cc e p t a bl e costs) a n d
dis pos a ls d urin g t h e y e a r , e x a m in e

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in v oic e s, c a pit al e x p e n dit u r e

a u t h o ri z a tio ns , le a s e s a n d o t h e r
d a t a t h a t s u p por t t h e se a d ditio ns
a n d d isp os als . Also , w h e r e
a p plic a ble , r e vi e w th e r a tio of l a bor
ca pit a liz e d v e rs u s e x p e n s e d a n d
co m p a r e t o p rior y e a r a n d
e x p e ct a tio ns.
3

L e a s e s, r e p a ir a n d m ain t e n a n c e :

Re v i e w a n d e x a m in e s u pp o r t fo r
r e n t als u n d e r o p e r a tin g l e a s e s a n d
for sig nific a n t c h a r g e s t o r e p a irs,
m ain t e n a nc e a n d o t h e r e x p e ns e
acc o u n ts t o d e t e r m in e if t h e y
sh o uld b e c a pit a liz e d a s p r o p e r t y ,
pla n t a n d e q uip m e n t .
4

D e pr e ci a tio n , d e pl e tio n a n d
a m o r tiz a tio n :

X X

Re vi e w r e a so n a bl e n ess of
d e p r e ci a tio n , d e ple tio n a n d
a m or tiz a tio n c h a r g e b y r e f e r e n c e t o
t h e clie n t's a cc o u n tin g p olic y or
a p plic a ble fin a n ci a l re p o r tin g
fra m e w or k a n d e x p e ct a tio n for
cu rr e n t y e a r .
5

I m p a ir m e n ts of p ro pe r t y , pl a n t a n d
e q uip m e n t :
Us e infor m a tio n o b t ai n e d d u ri n g t h e
a u dit in d e t e r m inin g w h e t h e r
m a n a g e m e n t h as id e n tifi e d
a p p ro pri a t e in dic a t ors of
i m p air m e n t .

RELEVANT ASSERTIONS*
Index Significant Account and Primary
Substantive Procedures
L

Intangibles, including Goodwill

E v id e nc e of ch a n g e s in in t a n gi ble s :

B/S

P/L

E V C R&O P&D

O M C P&D

X X X

O b t ain a sch e dul e of in t a n gibl e s,

inclu din g g oo d will, a n d t e st t h e
b a s e s o n w hich a d ditio ns,
a m o rtiz a tio n a n d disp os als a r e
r e co r d e d. E x a min e in v oice s,
a u t h ori z a tio ns, co n tr a ct s,
a g r e e m e n ts, a n d o t h e r d a t a t h a t
su p p ort o w n e rship of in t a n gible s
c a pit a liz e d a n d disp os e d of d u rin g
th e y ear.
2

I m p a ir m e n t of in t a n gible s :

D e t e r m in e w h e t h e r w rit e do w n s a r e
r e q uir e d, i n accor d a nc e wit h t h e

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cli e n t's a cco u n tin g p olici e s o r

a p plic a bl e fin a n ci al r e p or tin g
fr a m e w or k t o r e fl e ct i m p a ir m e n t of
t h e c a rr yin g a m o u n ts of in t a n gible
a sse ts or goo d w ill.

RELEVANT ASSERTIONS*
Index Significant Account and Primary
Substantive Procedures
M

Notes payable

V e rific a tio n of n ot e s p a y a bl e a n d
r e l a t e d o blig a tio ns :

B/S

P/L

E V C R&O P&D

O M C P&D

X X X

X X X

C o n fir m n o t es p a y a bl e or r e v i e w
su p p orti n g d oc u m e n t a tio n a s t o
a m o u n ts o w e d, t e r m s, coll a t e r a l
a n d r est rictio n s a n d t h e d e b t or's
co m plia nc e wit h t h e lo a n p r o visio ns
a n d id e n tif y lie ns, s e c u rit y
in t e r e sts, a n d a sse ts pl e d g e d as
lo a n coll a t e r a l.
2

I n sp e ctio n of co n t r a ct s :
I n sp e ct d ocu m e n t a tio n of lo a n
a g r e e m e n ts o r o th e r sh o rt - t e r m
le n din g a r ra n g e m e n ts ( e . g . ,
f a cto rin g ) to d e t e r m in e t h e t e r m s,
r e st rictio ns, r e v ol v in g lin e s of
cr e dit, a n d ot h e r p e r tin e n t
p ro visio n s of n o t es p a y a bl e .

C o m pli a n ce w it h co n t r a ct t e r m s :
T e st c alcula tio ns a n d o t h e r
e v id e n c e re l a tin g to co m pli a n ce
w it h t h e t e r m s, r e strictio ns, or
o t h e r p r o visio n s of lo a n
a g r e e m e n ts .

RELEVANT ASSERTIONS*
Index Significant Account and Primary
Substantive Procedures
N

Accounts payable, trade

A gr e e m e n t of su bl e d g e r w it h
g e n er a l l e d g e r :

B/S

P/L

E V C R&O P&D

O M C P&D

A gr e e t h e a cco u n ts p a y a bl e
su bl e d g e r t o t h e g e n er a l l e d g e r
co n trol acco u n t a n d in v e stig a t e
la r g e a n d u n usu a l r eco n cilin g it e m s.

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U n u su a l it e m r e vi e w :

Page 12 of 23

X X X

I n q uir e a b o u t or p e rfor m a r e vi e w
of t h e acco u n ts p a y a bl e s u ble d g e r
for u n us u al it e m s, e . g . , si g nific a n t
d e bit b a l a n ce s in t h e acco u n ts
p a y a bl e s u bl e d g e r o r o t h e r
u n e x p e ct e d a m o u n ts to v e rif y
pro p e r cl assific a tio n a n d v a lu a tio n .
3

A cco u n ts p a y a bl e cu t off :

Pe rfor m c u toff t ests for go o ds a n d

se r vic es r e c ei v e d as w e ll as for
su p pli e r cr e dit m e m os to v e rif y t h a t
tr a n sa ctio n s a r e co m pl e t el y
re co r d e d in t h e co rr ect p e rio d .
4

S e a rch fo r u n r e co r d e d li a biliti e s :

X X

Pe rfor m a se a rc h for u nr e cor d e d

li a biliti e s a t t h e y e a r e n d d a t e b y
se l ectin g su bs e q u e n t disb urse m e n t s
a n d u n m a tch e d in v oic e s a n d
r e c ei vin g r e p or t s.
5

V alu a tio n o f a cco u n ts p a y a bl e :

T est a p p ropri a t e v a lu a tio n of

acco u n ts p a y a bl e in for e ig n
cur r e nci e s.

RELEVANT ASSERTIONS*
Index Significant Account and Primary
Substantive Procedures
O

Income taxes, deferred taxes

and related income statement
accounts

R e co ncilia tio n of a cco u n t in g t o

t a x a bl e in co m e :

B/S

P/L

E V C R&O P&D

O M C P&D

T e st t h e r e con cilia tio n of th e

c u rr e n t y e a r b o o k / loc al
G A AP / st a t u t o r y a n d t a x a bl e
in co m e , v a lid a t e t h e s plit b e t w e e n
p e r m a n e n t a n d ti m i n g diff e r e nc e s,
a n d co m p a r e r e co n cilin g it e m s w it h
t h ose in p rior y e a rs a n d e x a m in e
s u p p or t.
2

Pro visio n s for in co m e t a x e s :

T e st co m p u t a tio n s of p ro visio n s for

c u rr e n t a n d d e f e rr e d in co m e t a x e s
for th e cu rr e n t y e a r a n d r e con cil e t o
a p p ro p ria t e b a la nc e sh e e t a n d
inco m e s t a t e m e n t a cco u n ts.
3

I m p air m e n t of d e f e rr e d t a x a ss e ts :

I n v e stig a t e p o t e n tial i m p air m e n ts

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of d e f e rr e d t a x a ss e ts.
4

Mo v e m e n t of i nco m e t a x a cco u n t
b al a n c es :

X X

X X X

R e vie w t h e m o v e m e n t of inco m e
t a x a cco u n t b a la n c es fro m p rior
y e a r (inclu din g t h os e cu rr e n tly
p a y a bl e o r d e fe rr e d ) a n d v a lu a tio n
a llo w a n ce s for d ef e rr e d t a x a sse ts.
5

Pro visio n s for c e r t a in t a x p ositio n s :

D e t e r m in e w h e t h e r p ro v isio n h a s t o
b e m a d e for a n y t a x p ositio n s t a k e n
b y th e cli e n t or o t h e r t a x
co n tin g e ncie s, e . g . , a s a r e sult of
r el a t e d p a r t y t ra n s a ctio n s, t h a t m a y
b e ch alle n g e d b y t a x a u t h oritie s.
6

B a sis fo r r e co r din g r el a t e d p a r t y
tr a n s a ctio n s :
T e st t h a t i n t e rco m p a n y a n d o t h e r
r el a t e d p a r t y t ra n s a ctio n s h a v e a
v a lid b u sin ess r e a so n a n d a r e
r eco r d e d o n a n a r m 's l e n g t h b a sis.
I f in d o u b t , co nsid e r t h e
in v ol v e m e n t of a p p ro pri a t e EY
p rof e ssio n a ls.

RELEVANT ASSERTIONS*
Index Significant Account and Primary
Substantive Procedures
OOT
1

B/S

P/L

E V C R&O P&D

O M C P&D

Indirect Taxes
VAT su m m ary :

X X X

O b t a in a su m m a r y of V A T o n in p u ts
a n d V A T o n o u t p u ts o v e r a
m o n th / q u a r t e r / y e a r a n d co m p a r e t o
a su m m a r y of s a le s a n d p u rch a s es
o v er t h e s a m e p e rio d . I n v e stig a t e
a n y u n usu a l v a ri a tio ns, t a k in g i n t o
a cco u n t a p plic a ble V A T r e lie fs, s uch
a s e x e m p tio n s or z ero - r a t e s.
2

V A T r e co ncilia tio n :

O b t a in a r eco n cili a tio n of t h e l a t e st

V AT r e t u rn t o t h e g e n e r a l l e dg e r .
O b t ain e x pla n a tio ns for r e co ncilin g
it e m s a n d a g r e e t o s u p por tin g
d ocu m e n t a tio n w h e r e a p p r o pri a t e .
3

C ust o m s d u t y :

X X X

C o m p a r e t h e t o t a l c u st o m s d u ti e s
for t h e p e rio d to t h e e x p ect e d
c u st o m s d u t y b y r e f e r e n c e t o t h e
p u rch a s es or o th e r origin a tin g
t r a n s a ctio n s o v e r t h e s a m e p e riod.

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I n v e stig a t e sig n ific a n t v a ri a nce s

fr o m e x p e ct a tio ns .
4

Ot her t a xes:

X X X

R e v ie w sign ific a n t o t h er t a x e s ( e .g . ,
p ro p e r t y t a x e s, for corr e ct n ess a n d
p ro p e r c u t off. ) .
5

A ccr u e d li a biliti es :

R e v ie w t h e sc h e d ule of p ro visio ns
a n d a ccr u e d li a biliti e s for V A T a n d
o t h er in dire ct t a x e s for corr e ct n e ss
a n d co m pl e t e n ess, a gr e e a m o u n ts t o
t h e g e n e r al le d g e r acc o u n ts a n d
e st a blis h pro p e r c u toff.
6

U n r e cor d e d n o n -in co m e t a x
li a biliti e s :

X X X

D e t er m in e w h e t h e r a pro visio n is
r e q uir e d for a n y n o n -in co m e t a x
p ositio ns t a k e n b y t h e e n tit y or
o t h er t a x co n tin g e n ci es t h a t m a y b e
ch a lle n g e d b y t h e t a x a u t h orit y .
7

C o m pli a n c e wit h l e gisl a tio n :

X X X

F o r a s a m pl e of r e le v a n t
t r a n s a ctio n s ( e . g ., i m p o r t e d
in v e n t or y in t h e ca s e of c u st o m s
d u t y o r sa l es in r es p e ct of V A T ,
d e t e r m i n e w h e t h e r t h e n o n -in co m e
t a x h a s b e e n p ro p e rly acco u n t e d fo r
in a ccor d a nc e wit h t h e n o n -inco m e
t a x l e gisl a tio n . )

RELEVANT ASSERTIONS*
Index Significant Account and Primary
Substantive Procedures
P

Provisions, accrued and other

liabilities, deferred income

C or r e ct n ess a n d co m p l e t e n e ss of
pro v isio ns :

B/S

P/L

E V C R&O P&D

O M C P&D

Re vi e w t h e sch e dul e of pr o v isio ns ,

accru e d lia biliti es a n d d e fe rr e d
in co m e fo r co rr e ct n e ss a n d
co m pl e t e n e ss , a g re e a m o u n ts t o t h e
g e n e r a l l e d g er a cco u n ts a n d v e rif y
pro p e r c u toff.
2

Pe n sio n a n d ot h er e m plo y e e r e la t e d
lo n g - t e r m r es e r v es :

X X

E x a m in e t h e co m p ositio n a n d
co m p u t a tio n of p e nsio n a n d o t h e r
e m plo y e e r el a t e d lo n g - t e r m
re s e r v es for r e a so n a bl e n e ss a n d
co n sid e r t h e in v ol v e m e n t of EY

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pr of e ssio n als.
3

A pp r o p ri a t e n e ss of ot h e r li abiliti e s :

Re v i e w o th e r li a biliti e s t o d e t e r min e
t h e y a r e a p pro p ri a t e . D e t e r min e
t h a t t h e a m o u n ts a p p e a r t o b e
re a so n a bl e in co m p a riso n wit h prior
y e a rs a n d u n d er co n sid e r a tio n of
y o u r u n d e rst a n din g of t h e cli e n t's
b u sin ess a n d c h a n g e s t o it.
4

D e t a il e d r e v i e w of l a w y ers
co nfir m a tio ns a n d o t h e r
d ocu m e n t a tio n :

X X X

X X

Re v i e w l a w y e r co n fir m a tio n s a s
re q uir e d in t h e PG AP ; m in u t e s ;
w h e re a p plic a bl e , corr e sp o n d e n c e
wit h r e l e v a n t lic e n sin g or r e g ul a tor y
bo di es ; a n d o t h er d oc u m e n ts to
v e rif y t h a t a p p ro p ri a t e
re s e r v es / accr u als h a v e b e e n
re co rd e d b y t h e cli e n t .
5

S e a rch for u n r e cor d e d r e se r v e s a n d

accru als :
S e a rch for u n r e cor d e d
re s e r v es / accr u als, e . g ., r e l a t e d t o
e m plo y e e s, co n t r a cts ( r e n t, l e a s e ) ,
fin a nc e (in t er e st ) , s a l es ( pr o d uct
a n d s e r vic e w a rr a n ti es,
co m m issio ns, r e t u r ns) , p u rch a s e s
( go od s a n d se r vic es, lic e n s es,
ro y a lti e s) , s e r vice s r e c ei v e d ( a u dit ,
t a x , l e g a l, co ns ultin g ) .

RELEVANT ASSERTIONS*
Index Significant Account and Primary
Substantive Procedures
PWA
1

B/S

P/L

E V C R&O P&D

O M C P&D

Significant Account and Primary

Substantive Procedures
E v a lu a tio n of w a rr a n t y a ccr u a l
co m p u t a tio n :

X X X

O b t ain a n d u n d e rs t a n d t h e
co m p u t a tio n of w a rr a n t y a ccr u a l
a n d co m p a r e w it h prior y e a r.
E v al u a t e m a n a g e m e n ts m e t h o d
a n d a ssu m p tio n s us e d in e sti m a tin g
t h e w a rra n t y a ccr u a l. E v alu a t e
w h e t h e r a ssu m p tio ns us e d for
r e p a ir cost , q u a n titi e s, a n d r e t u rn
r a t e a r e r e a son a ble .

RELEVANT ASSERTIONS*

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Index Significant Account and Primary

Substantive Procedures
Q

Long-term debt, leases and

related income statement
accounts

Lo n g - t e r m d e b t in t e r e st e x p e ns es
a n d co m pli a n c e w it h a g r e e m e n ts :

Page 16 of 23

B/S

P/L

E V C R&O P&D

O M C P&D

X X X

X X X

X X X

Re v i e w su m m a r y of lo n g - t e r m d e bt
a n d in t e r e st pr e p a r e d b y t h e cli e n t
for r e a son a bl e n e ss of ca lc ul a tio n s of
in t e r e st e x p e n se a n d a ccr u e d
in t e r e st inclu din g f or eig n cu rr e nc y
tr a nsla tio n s a n d a g r e e sch e dul e s t o
g e n er a l l e d g e r . T e st co m pli a n ce
wit h t h e t e r m s, m a t u riti e s,
r estricti v e co v e n a n ts, o r ot h e r
pr o v isio n s of d e b t a gr e e m e n ts.
2

I n s p ec tio n of n e w a gr e e m e n ts :
Fo r n e w a g re e m e n ts in th e y e a r
u n d e r a u dit , ins p e ct o rigin al or
a u t h e n tic a t e d co pie s of d e bt
a g r e e m e n ts, o r ot h e r re l a t e d
docu m e n t s t o t e st t h e t e r m s,
r es tric ti v e co v e n a n t s a n d ot h er
p e rtin e n t p r o visio ns of lo n g - t e r m
d e bt .

C oll a t e r a ls :
I d e n tif y li e ns, se curit y in t e r e st s,
a n d a ss e ts pl e d g e d a s coll a t e r al fo r
d e bt , cr oss- r e fe r e nce to t h e
co rr e sp o n din g g e n e r a l l e d g e r
acco u n ts a n d v e rif y p r o p e r
disclos ur es .

V erific a tio n of e x ist e nc e a n d

o blig a tio ns :

C o nfir m lo n g - t e r m d e b t or r e vie w
su p p ortin g d ocu m e n t a tio n a s t o
a m o u n ts o w e d , t e r m s, coll a t e r al,
r est rictio n s a n d t h e cli e n t's
co m pli a n c e wit h t h e p ro visio n s of
t h e a gr e e m e n ts.
5

L e a s e a n d r e n t co n t r acts :

Re vi e w su m m a r y of l e a s e a n d r e n t
co n t r a cts a n d t e st co rr e ct
p r e s e n t a tio n ( e . g . , o p e r a tin g or
fin a nc e le a s e ) in t h e fin a nci al
st a t e m e n ts .

RELEVANT
ASSERTIONS*

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B/S
Index Significant Account and Primary Substantive
Procedures
S

Derivatives/Hedging/Commitments/Contingencies

V e rific a tio n of e x ist e n c e a n d o w n e rship :

P/L

E V C R&O P&D O M C P&D

X X

V e rif y t h e e x ist e n c e a n d o w n e rship of r eco r d e d

d e ri v a ti v es t h ro u g h co n fir m a tio n w it h t h e b ro k e r / d e a le r
or co u n t e r p a r t y or e x a m in a tio n of e vid e n c e of
o w n e rship . C o nfir m b o t h s e t tl e d a n d u n s e t tle d
tr a n s a ctio n s w it h t h e b ro k e r / d e a le r or co u n t e r p a r t y .
R e q u e st t h e inclusio n of o t h e r infor m a tio n a b o u t t h e
d e ri v a ti v es, s u c h as w h e t h er t h e r e ar e a n y sid e
a gr e e m e n t s .
2

D e t ail e d r e vi e w of min u t es a n d o t h er e vid e n c e :

X X

Re v i e w m in u t e s, co n t r a ct a g r e e m e n ts, a n d co nfir m a tio n

r e pli es fo r e v id e n ce a n d co m pl e t e n ess of t h e e x ist e n c e
of d e ri v a ti v e s, of li e n s, pl e d g es, or o t h er s e c u rit y
in t e r ests in d eri v a ti v e s ; a n d of co m m it m e n ts t o a cquir e
o r dis p ose of d e riv a ti v es.
3

I n q uir y for co m pl e t e n ess of d e ri v a ti v e s :

I n q uir e a b o u t asp e cts of o p e r a tin g a ctivitie s t h a t m ig h t

p re s e n t risk s h e d g e d b y d e ri v a ti v e s.
4

I d e n tific a tio n of e m b e d d e d o r s u rpris e d e ri v a ti v e s :

I d e n tif y a n y e m b e d d e d o r s ur pris e d e ri v a ti v e s n ot
o t h er wis e id e n tifi e d in st e ps 1 to 3 a b o v e , e . g ., us e t h e
d e ri v a ti v es id e n tifie r to ol ( e . g ., U - 2 6 1 or I F R S ) .
5

T e st of f a ir v a lu e of d e ri v a ti v e s :

T e st t h e f a ir v a lu e of d e ri v a tiv e s a n d t h e a p p ro p ri a t e
r ecor din g in th e fin a n ci a l st a t e m e n ts.
6

I n q uir y for co m pl e t e n e ss of sig nific a n t c o m m it m e n t s :

X X

XXX X

I n q uir e of m a n a g e m e n t for co m pl e t e listin g of sig nific a n t

co m m it m e n ts, e . g . , p urch a s e or s al e co n t r a cts, fix e d p ric e d o r lo n g- t e r m a gr e e m e n ts, s er vic e g u a r a n t e es,
insu r a nc e p olicie s a n d d e t e r m in e w h e t h e r or n o t
disclosu r e s n e e d t o b e m a d e .
7

I d e n tific a tio n of sig nific a n t co n ti n g e ncie s :

Re vi e w l a w y ers co n fir m a tio n s a n d o th e r a p p ro pri a t e
d ocu m e n ts for si g nific a n t co n tin g e ncie s a n d d e t e r m in e
w h e t h e r or n ot a ccr u a ls h a v e t o b e r e cor d e d a n d / or
disclosu r e s m a d e .

A g re e m e n t of d eri v a ti v e s s u ble d g e r to g e n e r a l l e d g e r :

A g re e t h e d e ri v a ti v e s su bl e dg e r (s ) to t h e g e n er a l l e d g e r
co n trol a cco u n t s. I n v e stig a t e la r g e or u n us u al
r eco ncilin g it e m s .
9

H e d gin g R el a tio ns hip :

XX

E v a lu a t e t h e h e d gin g r e l a tio n s hip a n d v erif y t h a t a ll

co n ditio ns for h e d gin g r el a tio nships ( e . g . , f a ir v alu e
h e d g e , c a s h flo w h e d g e , a n d n e t in v e st m e n t h e d g e ) a r e
in a ccor d a nc e wit h t h e clie n t's a cco u n tin g p olici e s or

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Page 18 of 23

a pplic a bl e fin a nci a l r e p o r tin g fr a m e w o r k .

RELEVANT ASSERTIONS*
Index Significant Account and Primary
Substantive Procedures
T

Equity

E q uit y r e c o ncili a tio n sch e d ule :

B/S

P/L

E V C R&O P&D

O M C P&D

O b t a in a n e q uit y r eco n cili a tio n

sch e d u le , i ncl u din g r e t a in e d
e a r nin gs, a g r e e t o g e n e r a l l e d g e r
a cco u n t s a n d t e st m o v e m e n ts fro m
p rior y e a r e n d t o c u rr e n t y e a r e n d
t o v erif y p ro p er a cco u n tin g for
c h a n g e s in e q uit y ( e .g . , p rofit
dist rib u tio ns, o t h e r e q uit y
r e d u ctio n s or in cr e as e s) a n d
d e t e r m in e c o m p l e t e n ess a n d
co m plia n c e w it h l a ws a n d
r e g ul a tio n s inclu din g t a x a tio n
iss u e s.
2

Min u t e s a n d e q uit y tr a ns a ctio ns :

Re vi e w b o a r d of dir e cto r ,
sh a r e h ol d e r a n d co m m it t e e m e e tin g
m in u t e s a s w ell a s ch a n g e s t o t h e
a r ticl e s of in cor p or a tio n for iss u e s
a ff e ctin g t h e fi n a ncial st a t e m e n ts
inclu di n g t h e n o t e s . I f a p plic a ble ,
co n fir m a ll t r a ns a ctio n s wit h a
t r a n sf e r a g e n t or sh a r e r e gist ra r .
A g r e e a n y ch a n g e s in st oc k t o t h e
g e n e r al l e dg e r.
3

I n quir y fo r stoc k op tio n

a gr e e m e n t s :

X X X

I n q uir e of m a n a g e m e n t for a n y
st oc k op tio n a g r e e m e n ts a n d
d e t e r m in e a p pro p ri a t e fu r t h er a u dit
p roce d ur e s.
4

A p pr o p ri a t e n ess of di vid e n d
p a y m e n ts :

V e rif y t h a t all div id e n d p a y m e n ts

a r e a p pro p ria t e l y a p p ro v e d a n d
d ecl a r e d , a n d t h a t t a x r e g ul a tio n s
h a v e b e e n follo w e d .

RELEVANT ASSERTIONS*
Index Significant Account and Primary
Substantive Procedures

B/S

P/L

E V C R&O P&D

O M C P&D

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UA
1

Page 19 of 23

Revenue / Sales
O v er a ll a n a l y tic a l r e v i e w fo r
si g nific a n t inco m e st a t e m e n t
a ccou n t s :

Pe rfo r m a n o v er a ll a n a l y tic a l r e vi e w
for a ll sig nific a n t in co m e st a t e m e n t
a cco u n ts a n d in v e stig a t e a n y
sig nific a n t c h a n g es or l ac k of
e x p ect e d ch a n g es, e .g . b y m e a n s of
co m p u t e r - a ssist e d a u dit t e ch ni q u e s
( C A A T ) . I nclu d e t h os e acc o u n ts n o t
a lr e a d y co v e r e d t h ro u g h b a l a n ce
sh e e t a cco u n t t e stin g .
2

R e v e n u e r eco gnitio n pr oc e d u r e s :

X X X

Pe rfor m re v e n u e r eco g nitio n

p r oce d u r e s (if n ot alr e a d y co v e r e d
b y t ests of acco u n ts r ec e iv a bl e s,
t r a d e a n d in t e rco m p a n y ) , for
e x a m pl e , a n a l y tic al p r oce d u re s
u sin g disa g gr e g a t e d d a t a ( e . g . , b y
m o n t h , b y p ro d uct li n e , b y
g e o g r a phic a l a r e a , b y se g m e n t) ,
in q uiry of sa l es a n d m a rk e tin g
p e rso n n el for a n y u n usu al
t r a n s a ctio n s o r si m il a r it e m s,
r e vi e w of t h e t e r m s of s a l es
a gr e e m e n ts -inclu din g s al e s
in c e n ti v e s- a n d cli e n t's p olici e s for
h a n dlin g r e t u r ns , to id e n tif y
p o t e n tia l u n us u al t r a ns a c tio ns or
e v e n ts .

RELEVANT ASSERTIONS*
Index Significant Account and Primary
Substantive Procedures
UAR
1

B/S

P/L

E V C R&O P&D

O M C P&D

Sales returns
S al e s r e tu r n s a n d a ccr u a l a n al y sis :

X X

1 ) E v alu a t e t h e clie n ts a bilit y t o

re a son a bl y e sti m a t e f u t u r e p ro d u ct
re t u r n s t o su p p or t r e v e n u e
re co g nitio n a t t h e ti m e o f d e li v e r y .
2 ) Pe rfor m p roce d u re s t o e v a lu a t e
t h e acc r u al for f u t u r e p ro d uc t
r e t ur ns. 3 ) I n v estig a t e sig nifica n t
or u n u su al ch a n g e s fr o m t h e p rior
p e rio d b a se d o n a ct u a l sa l e s
re t u r n s in t h e c u rr e n t p e rio d t o
d e t e r m in e w h e t h e r t h e cu rr e n t y e a r
acc ru al for f u t u r e p ro d uc t r e t u r ns
m a y r e q uir e a d j ust m e n t .

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RELEVANT ASSERTIONS*
Index Significant Account and Primary
Substantive Procedures
UB
1

B/S

P/L

E V C R&O P&D

O M C P&D

Other Income
C o n t e n t s of misc ell a n e o us i nco m e :

X X X

U n d e rst a n d co n t e n ts of
m isc ella n e o us inco m e a cco u n ts.
I n v e stig a t e sig nific a n t u n usu al
t r a n s a ctio n s, if n o t a lr e a d y co v e r e d
b y b ala nc e sh e e t a cco u n t t e stin g .

RELEVANT ASSERTIONS*
Index Significant Account and Primary
Substantive Procedures
UC
1

B/S

P/L

E V C R&O P&D

O M C P&D

Finance Income
I n t e r es t a n d di v id e n d in co m e :

X X X

T e st in t er e st a n d di vid e n d inco m e
for sig nific a n t in v e st m e n ts or ch e c k
r e a so n a bl e n ess b y co m p a rin g w it h
t h e r e la t e d in v e st m e n t b ala nc e s.
2

C h a n g e s i n v alu e of in v e st m e n ts :
D e t e r m in e t h a t ch a n g e s in t h e
v a lu e of in v est m e n ts a r e pr o p e rly
r ecor d e d in t h e inco m e st a t e m e n t .

RELEVANT ASSERTIONS*
Index Significant Account and Primary
Substantive Procedures
VA
1

B/S

P/L

E V C R&O P&D

O M C P&D

Cost of Sales
C o m p a riso n of cost of sa l e s w it h
p rior p e rio d :

X X X

O b t a in d e t a il of cost of s a le s
a cco u n ts in co m p a riso n wit h t h e
p rior p e rio d. I n v estig a t e a n d
e x pl ain m a jo r c h a n g e s, l a rg e o r
u n u su a l tr a n s actio n s, or t h e la c k of
e x p e ct e d c h a n g e s, if n o t a lr e a d y
co v e r e d t h ro u gh a n a l y tic a l r e v i e w of
s a le s a cco u n ts inclu di n g g ross

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m a r gin a n a l ysis.
2

La r g e a n d u n usu al e x p e ns e r e vie w :

R e v i e w t h e a p p ro pri a t e n e ss of l a r g e
a n d u n usu al e x p e ns e s.

RELEVANT ASSERTIONS*
Index Significant Account and Primary
Substantive Procedures
VB
1

B/S

P/L

E V C R&O P&D

O M C P&D

Payroll
P a y roll a n a ly tics :

X X X

Co m pare the a verage pay per

e m plo y e e o r h o ur t o p rior y e a r
inclu din g e m plo y e e b e n e fits, if
si g nific a n t . C o nsid e r dis a g g r e g a tin g
t o t y p es of e m plo y e e s or b y
loc a tio n .
2

P e nsio n e x p e n se s :
T es t corr ec t n ess of j o u r n a l e n t rie s
in co n n e ctio n wit h p e nsio ns a n d
p os t- r e tir e m e n t e x p e n s e s, cu rr e n t
p a y m e n ts a n d for c h a n g es in
p e nsion r e se r v e s.

RELEVANT ASSERTIONS*
B/S
Index Significant Account and Primary
Substantive Procedures

P/L

E V C R&O P&D O M C P&D

Depreciation/Depletion/Amortization

S e e w or kst e ps for PPE u n d e r s e ctio n K

RELEVANT ASSERTIONS*
Index Significant Account and Primary
Substantive Procedures
VC

B/S

P/L

E V C R&O P&D

O M C P&D

Selling and Distribution

Expenses
C o m p a riso n of s e llin g a n d
distrib u tio n e x p e n s e s wit h p rio r
p e rio d :

X X X

O b t a in d e t a il of se llin g a n d
distrib u tio n e x p e ns e a cco u n ts in

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co m p a riso n w it h t h e p rior p e rio d.

I n v es tig a t e a n d e x pl ain m a j or
ch a n g e s, la r g e or u n usu al
t r a n sa ctio ns, or t h e l a ck of
e x p e ct e d ch a n g e s a n d t h e
a p p ro p ri a t e n ess of t h e se ch a n g es.
2

La r g e a n d u n usu al e x p e ns e r e vie w :

X X

R e v i e w t h e a p p ro pri a t e n e ss of l a r g e
a n d u n usu al e x p e ns e s.

RELEVANT ASSERTIONS*
Index Significant Account and Primary
Substantive Procedures
VD

B/S

P/L

E V C R&O P&D

O M C P&D

Administrative and Other

Expenses
C o n t e n ts of a d m inist r a ti v e a n d
ot h e r e x p e ns e s :

X X X

U n d erst a n d co n t e n ts of
a d m inistr a tiv e a n d o t h e r e x p e ns e
a cco u n ts, e . g . , in t h e a r e a s of
p rof essio n a l s er vic e s f e e s, r e p a irs
a n d m ain t e n a nc e , le as e s a n d r e n ts,
m a n a g e m e n t co m p e ns a tio n ,
p olitic al c o n trib u tio ns a n d
d o n a tio ns, a n d m isc ella n e o us.
C o m p a r e wit h p r e v io u s p e rio d a n d
in v e s tig a t e a n y u n usu al
tr a ns a ctio ns .
2

R e v ie w of u n d e rly in g
d ocu m e n t a tio n :

X X X

F or sig nifica n t t r a n sa ctio n s

id e n tifie d i n t h e p r e vio us st e p ,
r e vie w u n d e rlyin g d ocu m e n t a tio n
for r e a so n a bl e n ess a n d b u sin e ss
p u rpos e .
3

C o m p l e t e n ess of l a w y e rs'
co n fir m a tio n s :

V e rify t h rou g h a r e vi e w of l a w y e r's

f e es t h a t a ll l a w y e rs a n d in - h o us e
le g al co u ns els, w h o h a n dle
sig nific a n t litig a tio n or o th e r cl a i m s,
h a v e b e e n co v e r e d in t h e l a w y ers'
co n fir m a tio n w or k .

RELEVANT ASSERTIONS*
Index Significant Account and Primary
Substantive Procedures

B/S

P/L

E V C R&O P&D

O M C P&D

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VE

Finance Expenses

I n t e r es t E x p e n s es :

Page 23 of 23

X X X

Re vi e w t h e r e a so n a ble n e ss of
in t e r e st e x p e nse for sig nific a n t
lo a n s b y co m p a rin g wit h t h e r el a t e d
lo a n b a l a n ce s.
2

C h a n g e s i n v alu e of in v e st m e n ts :
D e t e r m in e t h a t ch a n g e s in t h e
v a lu e of in v est m e n ts a r e pr o p e rly
r ecor d e d in t h e inco m e st a t e m e n t .

Related Topic:
I llu st r a ti v e S ect o r S u bst a n ti v e Pr oc e du r e s D ire cto r y
G o T o D ocu m e n t I D : 1 0 1 1 4 6 6 1
L a st Mo difi e d D a t e : 0 3 A u g 2 0 0 9

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