Podcast
Questions and Answers
When auditing 'Cash and Other Cash Items', which assertion is most likely to require more extensive substantive testing at year-end if controls are not relied upon?
When auditing 'Cash and Other Cash Items', which assertion is most likely to require more extensive substantive testing at year-end if controls are not relied upon?
- Rights and Obligations
- Completeness
- Existence
- Valuation (correct)
For 'Due from Bangko Sentral ng Pilipinas', testing the completeness assertion, what audit procedure would be considered?
For 'Due from Bangko Sentral ng Pilipinas', testing the completeness assertion, what audit procedure would be considered?
- Performing less extensive testing at the interim date (correct)
- Performing more extensive testing at or near year-end
- Omitting tests of controls due to low materiality
- Focusing solely on substantive analytical procedures
If an auditor decides not to rely on controls related to the valuation of 'Trading and Investment Securities', what type of testing is most likely to be performed and when?
If an auditor decides not to rely on controls related to the valuation of 'Trading and Investment Securities', what type of testing is most likely to be performed and when?
- Less extensive testing at interim date
- No substantive testing required
- Minimal testing throughout the year
- More extensive testing at or near year-end (correct)
For 'Property and Equipment' with minimal control risk, what approach is most appropriate for testing the existence assertion?
For 'Property and Equipment' with minimal control risk, what approach is most appropriate for testing the existence assertion?
For 'Deposit Liabilities', if controls are deemed effective, what type of substantive testing is suitable for the completeness assertion?
For 'Deposit Liabilities', if controls are deemed effective, what type of substantive testing is suitable for the completeness assertion?
If the auditor assesses a high inherent risk for the valuation of 'Bills Payable', and does not intend to rely on controls, which audit approach is most likely?
If the auditor assesses a high inherent risk for the valuation of 'Bills Payable', and does not intend to rely on controls, which audit approach is most likely?
What is likely to be the audit approach for 'Interest Income' if controls are operating effectively?
What is likely to be the audit approach for 'Interest Income' if controls are operating effectively?
For 'Interest Expense' with properly designed and implemented controls, what substantive procedures should the auditor consider?
For 'Interest Expense' with properly designed and implemented controls, what substantive procedures should the auditor consider?
Considering the high inherent and control risk for 'Provision for Expected Credit Losses' (PECL), what is the audit approach?
Considering the high inherent and control risk for 'Provision for Expected Credit Losses' (PECL), what is the audit approach?
What audit procedure is appropriate if 'Administrative Expenses' has high volume of transactions and the combined risk assessment is low?
What audit procedure is appropriate if 'Administrative Expenses' has high volume of transactions and the combined risk assessment is low?
Flashcards
Audit risk
Audit risk
Risk that an auditor expresses an inappropriate audit opinion when the financial statements are materially misstated.
Inherent risk
Inherent risk
The susceptibility of an account balance or class of transactions to misstatement that could be material, assuming there are no related controls.
Control risk
Control risk
Risk that a misstatement that could occur in an account balance or class of transactions and that could be material will not be prevented or detected and corrected on a timely basis by accounting internal controls.
Materiality
Materiality
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Tolerable Error
Tolerable Error
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Detection risk
Detection risk
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Study Notes
- Planning materiality is 4,500,000, and the tolerable error is 2,250,000.
Financial Statement Accounts and Related Disclosures (A1)
- The Amount in Financial Statements (FS) is 50,932,340.00 for both Completeness and Presentation & Disclosure.
- Both are deemed material, with amounts greater than the tolerable error.
- Completeness and Presentation & Disclosure require significant judgment.
- Substantive testing is more extensive and should be done at or near year end.
Cash and Other Cash Items (C1)
- Amount in FS is 3,056,333.00 for Completeness, Existence, and Valuation.
- The amounts are considered material, exceeding the tolerable error.
- There is a high transaction volume.
- Tests of controls for Completeness and Existence are performed, with less extensive testing at interim dates.
- Valuation requires more extensive substantive testing near year-end.
Due from Bangko Sentral ng Pilipinas (C2.1)
- The Amount in FS is 3,000,000.00 for Completeness, Rights and Obligations, Existence and Valuation.
- All are considered material, with amounts greater than the tolerable error.
- Tests of controls are performed for each assertion due to regular reserve requirements.
Due from Other Banks (C2.2)
- The Amount in FS is 4,200,000.00 for Completeness, Rights and Obligations, Existence and Valuation.
- There is a high transaction volume.
- Amounts are material, with amounts greater than the tolerable error.
- Tests of controls performed with less extensive testing at the interim date.
Trading and Investment Securities (D1)
- Trading and Investment Securities Amount in FS is 5,000,000.00 for Completeness, Rights and Obligations, Existence and Valuation
- Complex transactions are subject to valuation models.
- Completeness, Rights and Obligations and Existence assertions are tested with tests of controls.
- Completeness, Rights and Obligations and Existence are tested with less extensive testing.
- Valuation requires more extensive substantive testing at or near year end.
Loans and Receivables (E1)
- Loans and Receivables Amount in FS is 10,000,000.00 for Completeness, Rights and Obligations, Existence/Occurrence and Valuation/Measurement.
- There is a high transaction volume.
- Amounts are considered material, exceeding the tolerable error.
- Tests of controls will be performed on each assertion.
- Completeness, Rights and Obligations and Existence/Occurrence are tested with less extensive testing.
- Valuation/Measurement are tested with more extensive subatantive testing performed at or near year end.
Property and Equipment and Related Income Statement Accounts (K1)
- Property and equipment and related income statement accounts Amount in FS is 8,000,000.00 for Completeness, Existence and Valuation/Measurement
- Completeness and Existence assertions are tested with less extensive testing at the interim date
- Valuation/Measurement requires more extensive substantive testing at or near year end.
Deposit Liabilities (N1)
- Deposit Liabilities Amount in FS is 9,150,000.00 for Completeness and is 10,000,000.00 for Rights and Obligations, Existence/Occurrence, Valuation/Measurement.
- There is a high transaction volume.
- Completeness, Rights and Obligations and Existence/Occurrence assertions are tested with less extensive testing at the interim date
- Valuation/Measurement requires more extensive substantive testing at or near year end.
Bills Payable (N2)
- Bills Payable Amount in FS is 6,845,000.00 for Completeness, Rights and Obligations, Valuation/Measurement
- Completeness assertion involve legal requirements and considerations.
- Completeness and Rights and Obligations assertions are tested with less extensive testing at the interim date
- Valuation/Measurement requires more extensive substantive testing at or near year end.
Other Liabilities (P1)
- Other Liabilities Amount in FS is 1,800,000.00 for Completeness and Valuation/Measurement
- Completeness and Valuation/Measurement require more extensive substantive testing at or near year end.
Interest Income (UA1)
- Completeness and Occurrence interest income the Amount in FS is 45,900,000.00
- Proper recognition of income and expense is a significant risk.
- Completeness and Occurrence are both tested with less extensive testing at interim date
- Valuation/Measurement requires more extensive substantive testing at or near year end.
Interest Expenses (VA1)
- Completeness and Occurrence interest expenses the Amount in FS is 28,372,000.00.
- Completeness and Occurrence are both tested with less extensive testing at interim date
- Valuation/Measurement requires more extensive substantive testing at or near year end.
- Proper recognition of income and expense is considered a significant risk.
Provision for Expected Credit Losses (VA2)
- Provision for Expected Credit Losses for all three assertsions is 8,692,005.00
- All three assertions require more extensive substantive testing at or near year end.
- The significant judgment required and reliance on estimation/valuation models pose a substantial risk.
Administrative Expenses (VD1)
- Completeness and Valuation/Measurement expenses the Amount in FS is 2,105,000.00
- High transaction volume.
- Completeness and Valuation/Measurement are both tested with less extensive testing at interim date
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