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Principles
The substantive procedures (tests of details and substantive analytical procedures) should be designed during the planning phase to be responsive to the related risk assessment. The purpose of tests of details is to obtain direct audit evidence to detect material misstatements or non-compliance at the assertion level. Tests of details are mostly applied to selected individual items.
The auditor should carry out tests of details as designed in the planning phase, unless the evaluation of the results of tests of controls requires her/him to reconsider the nature, timing and/or extent of the tests of details.
Instructions
When performing tests of details, the auditor may find that:
- a selected item is not appropriate for the application of the audit procedure: in this case, the audit procedure may be performed on a replacement item. For example, a voided cheque may be selected when testing for evidence of payment authorisation. If the auditor is satisfied that the cheque had been properly voided such that it does not constitute an error, an appropriately chosen replacement is examined;
- (s)he is unable to apply the designed audit procedures to a selected item because, for instance, documentation relating to that item has been lost. If suitable alternative audit procedures cannot be performed on that item, the auditor ordinarily considers that item to be in error. (S)he also considers whether the reasons for the inability to apply appropriate audit procedures have implications for the assessed inherent or control risk or for reliance on management representations.
Resources
Examples
Tests of details that may typically be performed include:
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Financial audit
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Compliance audit
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Computation (recalculation)
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Check of the arithmetical accuracy of the accounts and budget reports
Check figures in the balance sheet and notes to the output of the underlying IT systems and/or supporting documentation used as the basis for the figures in the accounts
Verification of correct consolidation (e.g. elimination of intra-group transactions, consolidation entries and arithmetical accuracy), where appropriate
Arithmetical checks of off-balance sheet commitments
Check of the consistency of the balance sheet and economic outturn account with the trial balance
Check of the consistency of segment reporting with the economic outturn account
Verification that the opening balance sheet of the current year corresponds to the closing balance sheet of the previous year
Reconciliation between the budgetary outturn and the economic outturn
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Reperformance of calculations regarding claims, grants, etc.
Arithmetic checks of amounts, e.g. on an invoice
Reconciliation of the cost claim with underlying accounting records
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Analysis (excl. analytical review)
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Analyses and reconciliations of accounts and/or balances
Analysis of significant or unusual movements in individual accounts
Analysis of reconciliations performed by the entity, e.g. bank reconciliations
Analysis of budgetary execution
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Analysis of findings of work by internal and other auditors
Analysis of legal basis, legal and budgetary commitments, eligibility, tendering procedures
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Inspection and observation
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Examination of any modifications to the accounting rules
Tests of individual items of commitments, payments and of certain balance sheet items
Check that selected transactions have been correctly entered in the accounts
Examining material journal entries and other adjustments made while the financial statements were being prepared
Verification of execution of payments - that selected transactions have been correctly entered in the accounts and the corresponding payments have been made to the designated beneficiary, for the correct amount and according to the procedure laid down in the regulations
Follow-up of reports by IAS concerning the reliability of the accounts
Examination of reports drawn up regarding outstanding commitments
Inspection of the correct recording and valuation of pre-financing and invoices/cost statements not paid at year-end and related guarantees received
Check of cut-off operations (especially accrued charges)
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Inspection of physical assets
Examination of
- contracts
- claims
- ex-ante and ex-post control reports
- audit reports (internal and external)
- monitoring reports
Examination of supporting documents, e.g. invoices, public procurement documents, cost-benefit analysis, records by animals and manure, orthophotos, records of beneficiaries and land parcels
On-the-spot checks
Verification of payments - that selected payments have been made to the designated beneficiary, for the correct amount and according to the procedure laid down in the regulations.
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Enquiry and confirmation
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Enquiry of auditee management and staff
Confirmation of bank balances
Confirmation of receivables
Confirmation with third parties (e.g. legal counsel for outstanding court cases that may need to be disclosed as contingencies)
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Enquiry of auditee management and staff
Confirmation of bank balances
Confirmation of receivables
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Impact of Brexit
Brexit should not affect the way we do direct testing of transactions for [link title="Statement%20of%20Assurance" link="%2Faware%2FGAP%2FPages%2FCA-FA%2FReporting%2FStatement-of-Assurance.aspx" /]
, however it may be a factor in deciding whether or not to test transactions indirectly by using the [link title="work%20of%20others" link="%2Faware%2FGAP%2FPages%2FSpecific%2FWork-of-other-auditors.aspx" /]
, including by reperforming audit or control procedures carried out by others.
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[standards]
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[link new-window title="ISA%20530" link="https%3a%2f%2fwww.ifac.org%2fsystem%2ffiles%2fpublications%2ffiles%2fIAASB-2020-Handbook-Volume-1.pdf%23INTERNATIONAL%2520STANDARD%2520ON%2520AUDITING%2520530" /]
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