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Hasan Mahmud Maruf 1621513630 - Audit Quiz 3 Fall 2020
Hasan Mahmud Maruf 1621513630 - Audit Quiz 3 Fall 2020
Substantive test of transactions measures the operating effectiveness of internal controls and the
monetary correctness of transactions in the accounting system, focuses on individual transaction that
make up balances. E.g Rent paid, electricity bills. Substantive test of balances measures whether the
dollar amounts of account balances are materially misstated. E.g Cash Balance in balance sheet.
Question 2: Your audit partner has asked you to design substantive test for the “cash” balance of your
client. He has given you three objectives:
Objective 1: Ensure that the cash in the account exists in balance date.
Objective 2: Ensure that the cash balance in the balance sheet includes all cash transactions.
Objective 3: Ensure that the cash in the balance sheet has been recorded in their correct amount.
For each of the audit objectives above, identify the most relevant assertion and an example of
substantive audit procedure that you will perform to achieve the audit objective. (5 points)
Answer
Objective 1: Ensure that the cash in the account exists in balance date.
Objective 2: Ensure that the cash balance in the balance sheet includes all cash transactions.
Completeness , Undertake sequence check of transaction details, remittance advice and cheques
Objective 3: Ensure that the cash in the balance sheet has been recorded in their correct amount.
Accuracy, inspect supporting documents to verify dollar amounts of transactions.