Learning Objectives LO4 Describe the typical substantive procedures used to address the assessed risk of material misstatement in the main account balances and transactions in the revenues, receivables, and receipts process. LO5 Explain the importance of the existence assertion for the audit of cash and accounts receivable. LO6 Identify considerations for using confirmations when auditing cash and accounts receivable. LO7 Describe the audit of bank statement reconciliations and how auditors identify accounts receivable lapping and suspicious cash transactions. 1

Special Note: The Existence Assertion For accounts receivables and other assets, auditors place emphasis on existence and rights assertions.  Computation  Focus on assets that depend largely on calculations.  Inspection of Physical Assets  Inventories and assets can be examined, title documents can be vouched, security documents can be inspected. LO5 2

Special Note: The Existence Assertion Confirmation  Bank accounts, receivables can be confirmed.  Assets at other locations or in the hands of custodians can also be confirmed. Enquiry  Enquire as to agreements regarding minimum balances, pledging of receivables, pledging of other assets. LO5 3

Special Note: The Existence Assertion Inspection of documents (vouching)  Examine title documents, collateral, pledges. Inspection of documents (scanning)  Look for misclassified assets, uncharacteristic balances, errors or overpayments, or related party transactions and balances. LO5 4

Special Note: The Existence Assertion Analysis  Comparison of assets to related revenues or expenses, expenses with revenues, contra revenues with revenues, and write-offs. LO5 5