Question

You’ll need to come up with programs for the substantive audit procedures for each of the functional balance sheet areas (indicated with an asterisk (*) below).  

B series*                                  Cash Substantive Audit Documentation

C series*                                  Accounts Receivable Substantive Audit Documentation

D series*                                  Inventory Substantive Audit Documentation

E series*                                  Prepaids Substantive Audit Documentation

F series*                                   Property, Plant and Equipment Substantive Audit Documentation

I series*                                   Other Assets Substantive Audit Documentation

L series*                                  Current Liabilities Substantive Audit Documentation

N series*                                  Notes Payable Substantive Audit Documentation

Q series*                                  Stockholders’ Equity Substantive Audit Documentation

R series*                                  Revenue Substantive Audit Documentation

X series*                                  Expenses Substantive Audit Documentation

Answer 1

You’ll need to come up with programs for the substantive audit procedures for each of the functional balance sheet areas (indicated with an asterisk (*) below).   First we discussed about Substantive Procedure i.e. substantive procedure a process, step or test that creates conclusive evidence regarding the completeness, existence, disclosure, rights, or valuation i.e. the five audit assertions of assets and accounts of financial statements.
Series	Functional Balance Sheet Areas	Substantive audit procedure
B	Cash Substantive Audit Documentation	If immaterial: To confirm the amount of balance at year end, obtain a certificate from senior responsible person of the company. If material or if the entity is retail business, the auditor will decide to test petty cash: count the petty cash balance at year end examining the petty cash vouchers for authorization and the attached documentation for reasonableness.
C	Accounts Receivable Substantive Audit Documentation	Ledger scrutiny Debtors balance ledger aging report. Accounts reconciliations for all receivables Balance confirmation Subsequent realisation
D	Inventory Substantive Audit Documentation	Physical verification – physical counting Sales and purchase accounting verification Verification of inventory Issue to production and its accounting Management confirmation w.r.t to stock in transit Subsequent inward entry.
E	Prepaid Substantive Audit Documentation	Verify Initial Recognition of Prepaid Expenses Check Subsequent Amortization of Prepaid Expenses Reconciliation of Prepaid Expenses
F	Property, Plant and Equipment Substantive Audit Documentation	Obtained Fixed Assets register and check opening balance are matching with previous year audited balances Verify addition done during the year with purchase invoices. Verify Assets sold or scrapped during the year and supporting documents. Physical verification of fixed assets Check depreciation calculation for the current year Obtained management confirmation if assets are located outside audit entity and auditors are not verifying those assets.
I	Other Assets Substantive Audit Documentation	Check the inception of transaction. Nature of balance Document supporting papers related to the balances
L	Current Liabilities Substantive Audit Documentation	Ledger scrutiny Payable balance ledger aging report. Accounts reconciliations for all payable accounts Balance confirmation Subsequent payment settlement.
N	Notes Payable Substantive Audit Documentation	Ledger scrutiny Payable balance ledger report. Subsequent payment Documents copy for working paper purpose Document Notes payable due matching with balance sheet
Q	Stockholders’ Equity Substantive Audit Documentation	Check as per last audit report balance in stockholder ledger. Fresh proceeds during year and its accounting During the year dividend announce and its accounting. Right, ESOP or any bonus issue and its accounting Documents of all the above transaction placed during the year.
R	Revenue Substantive Audit Documentation	Sales made and its accounting Bank and cash payment received Reconciliation of Profit and Loss sales account to sales report extracted from ERP Cross verify with the turnover disclosed to statutory authority. Cut-off sales documents.
X	Expenses Substantive Audit Documentation	List of all major expenses and nature of payment done during the accounting period. Obtained detailed expenses ledger and verify the period of expenses and nature of expenses. documentation of Authorization process of payment of expenses. Do positive feedback