Required information Substantive Procedures for Debt Read the overview below and complete the activities that follow. Debt transactions are often few in number but large in dollar amount. As such, auditors are generally able to substantiate individual transactions rather easily. CONCEPT REVIEW: In an integrated audit of debt, a greater number of transactions are tested using dual purpose tests than for other accounts. Dual purpose tests are tests of both controls and substantive tests done at the same time. The auditor typically performs traditional substantive tests including sending out confirmations and examining copies of notes payable. Evaluating whether debt provisions and covenants have been met Valuation Read the listing of substantive procedures for debt and match each with its appropriate primary audit objective. Confirming debt Presentation and disclosure Vouching borrowing and repayment terms Cutoff Performing analytical procedures on debt and related accounts to ensure that all debt is properly included in the period under audit and that some notes have not been omitted Existence Examining copies of the actual signed note payable to determine the correct dollar amount of the liability Completeness

Required information Substantive Procedures for Debt Read the overview below and complete the activities that follow. Debt transactions are often few in number but large in dollar amount. As such, auditors are generally able to substantiate individual transactions rather easily. CONCEPT REVIEW: In an integrated audit of debt, a greater number of transactions are tested using dual purpose tests than for other accounts. Dual purpose tests are tests of both controls and substantive tests done at the same time. The auditor typically performs traditional substantive tests including sending out confirmations and examining copies of notes payable. Evaluating whether debt provisions and covenants have been met Valuation Read the listing of substantive procedures for debt and match each with its appropriate primary audit objective. Confirming debt Presentation and disclosure Vouching borrowing and repayment terms Cutoff Performing analytical procedures on debt and related accounts to ensure that all debt is properly included in the period under audit and that some notes have not been omitted Existence Examining copies of the actual signed note payable to determine the correct dollar amount of the liability Completeness

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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1. Although the primary objective of an independent audit is not the discovery of fraud, the auditors in their work on cash take into consideration the high relative associated with this asset. One evidence of this attitude is evidenced by the CPAs alertness on signs of lapping. Define lapping and explain the audit procedures that CPAs might utilize to uncover lapping. 2. What actions should be taken by auditors when the count of cash on hand discloses shortage?
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