Give examples of substantive procedures inthe acquisition and expenditure cycle andrelate them to assertions about significantaccount balances at the end of the period
Give examples of substantive procedures in
the acquisition and expenditure cycle and
relate them to assertions about significant
account balances at the end of the period
Substantive Procedures are an activities performed by an auditor to detect and disclose any kind of material misstatement or fraud at any level.
If an auditor physically examines the inventory and shows the accounting record that actually exists is said to be a process of substantive procedures .
The examples of substantive procedures are as follows:
1: Physical Inventory Count: An auditor takes a physical count of all the goods in a stock. They segregate the counting areas and count a team’s examined assigned area of inventory and record them on sheet. If a physical count of an inventory is $1, 00,000 then an auditor will take its count and record where this inventory has been used during a period
2: Accounts receivable confirmation: Auditor divides an account receivable into trade receivables and non-trade receivables and records them to bring accuracy. An auditor states the total amount of account receivable that are being allowed to a customer under the credit limit sets by a seller’s limit. If an account receivable of a firm are $500,000 then an auditor has to verify them and record them on category of trade and non-trade receivable.
3: Inquiring Customers Accounts: Auditor takes a briefing of all the customer accounts and all the transactions done under these accounts. If in a one month there is an opening of 50 customers account, then an auditor will keep a deep study of when and how these accounts are being operated.
4: Managing Invoice customers’ orders: Auditors matches the customer orders with an invoiced bill and record all the details of the transactions. If customers order are $1, 00,000 in a month, then an auditor will verify these orders and check their invoiced amount.
5: Managing collected invoiced funds: Auditors matches the customer collected orders with invoiced funds and record all the details of the transactions. If customer funds are $500,000 in a month then it is a responsibility of an auditor to verify whether they are invoiced or not.
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