AUD: Procedures to obtain sufficient appropriate evidence

The rules, one page each

1. What Drives the Nature, Timing, and Extent of Audit Procedures?What next?

   Base further procedures on assessed risk of material misstatement at the relevant assertion and the relevance and reliability of evidence obtained. Higher risk or weak, contradictory evidence requires more persuasive evidence.

2. Accounts Receivable Existence: Confirmations and AlternativesContrasting cases

   For material receivables at moderate or high existence risk, use positive confirmations when effective. Perform targeted alternative procedures for nonresponses and investigate confirmation exceptions with supporting evidence.

3. Accounts Receivable Confirmation Refusals and NonresponsesWhat next?

   Investigate management refusals and perform alternatives for blocked or unanswered positive confirmations. If evidence remains insufficient, qualify for material but not pervasive possible effects, or disclaim for material and pervasive possible effects.

4. Revenue occurrence and cutoff at year‑end: FOB shipping point done rightContrasting cases

   For occurrence/cutoff of revenue, vouch recorded year‑end sales to third‑party shipping evidence and terms; recognize revenue only when control transfers under the contract (often when goods ship under FOB shipping point).

5. Inventory: existence at count and valuation for obsolescenceStep by step

   For inventory existence, observe counts and test quantities (and confirm off‑site if applicable); for valuation, test aging/report data and corroborate pricing and recoverability with subsequent sales or market data.

6. Accounts payable completeness: search for unrecorded liabilitiesStep by step

   For A/P completeness, examine January-February disbursements and unmatched receiving reports and trace to year‑end obligations; agree to vendor invoices and receiving to detect unrecorded liabilities.

7. Before you rely on client reports or analytics: test inputs and precisionStep by step

   Test the completeness and accuracy of entity‑generated reports before using them; for significant risks, analytics must have sufficiently precise expectations or be supplemented with tests of details over relevant inputs and transactions.

8. External confirmations beyond A/R: cash, securities, and third‑party custodySort it

   Obtain direct written confirmations from independent custodians for cash, securities, and inventory held by third parties; when a bank requires client authorization, get statements directly from the bank; do not rely solely on client‑provided documents.