TRANSACTION CYCLES TEST OF CONTROLS AND SUBSTANTIVE TESTS OF TRANSACTIONS

TRANSACTION CYCLES the means through which an accounting system processes transactions of related activities
A. REVENUE & COLLECTION CYCLE
Activities involved: (1) Exchange of goods and services with customers; (2) collection of revenue in cash
Accounts affected: (1) Sales and related sales adjustments; (2) Cash in bank; (3) Accounts receivable and related
allowances; (4) Uncollectible accounts expense; and (5) Inventories
Documents used and Audit Significance
Documents
Significance
Customers purchase order
- Provides evidence that a customer actually ordered the goods.
- PO numbers are recorded on sales invoices to determine to which PO an
invoice relates.
Sales order
- Contains the sellers understanding of the terms.
- Numerical sequence helps ensure that shipments are made for sale orders and
all sales are billed.
Bill of Lading (Shipping Documents)
- Signature of carrier provides evidence that goods have been shipped.
- Numerical sequence helps ensure that all shipments are recorded as sales.
Credit memo
- Provides evidence that the seller has reduced the amount billed to a customer.
- Numerical sequence helps ensure that CMs are recorded.
Remittance Advice
- Indicates date and amount of payment and the invoices paid.
Uncollectible account authorization form - Numerical sequence helps ensure that all write offs are recorded.
Monthly statements
- Reports the beginning balance and transactions that occurred during the period.
Accounting records employed: (1) Sales journal; (2) Sales returns and allowances journal; (3) Cash receipts journal; (4)
General journal; (4) accounts receivable ledgers; and (5) Accounts receivable TB
I.

TEST OF CONTROL OVER SALES TRANSACTION

(1) Inquiry, (2) Observation, and (3) Review
CONTROLS
TEST OF CONTROLS
Assertion: EXISTENCE/OCCURRENCE, recorded sales are for shipments actually made to customers
Recording of sales is supported by customers PO, sales
- Examines approved customer PO, sales order, shipping
orders are approved by the credit departments and
documents and sales invoice.
approved and executed shipping documents
Contains required approval
Terms and descriptions should be consistent
Independent personnel prepares and mails monthly
- Observe whether these duties are segregated.
statement (follows up on complaints) and records accounts - Examine files on complaints received
receivable
Assertion: COMPLETENESS, all sales transactions that occurred are recorded
Prenumbered shipping documents are accounted to
- Observe the procedure
determine that all sales invoice is prepared for all
- Examine the invoice that bills the sale (sample)
shipments
A copy of sales invoice indicates that the shipment
was billed.
Prenumbered sales invoices are accounted to determine
- Observe the recording process if the personnel accounts
that all sales are recorded
for the numerical sequence
- Trace sales invoice to sales journal (sample)
Procedures are put in place to ensure timely recording of
- Inquire how the procedures are followed.
sales and proper cut off are established
- Observe if the procedures are followed.
- Inspect the report in the last shipment sent by the shipping
clerk to the billing clerk.
Proper cut off provides evidence of existence.
Assertion: RIGHTS AND OBLIGATIONS, sales recorded represent only sales transactions
Clerk checks sales orders and sales invoices for terms
- Observe whether such procedure is being performed
Assertion: VALUATION AND ALLOCATION, sales are correctly billed and recorded
(For goods shipped) Counted and descriptions on sales
- Observe whether such procedure is being performed.
order are compared with the shipping document
- Examine shipping orders for signature on the shipping
documents (sample)
Customer credit is approved by a responsible official prior
- Examine sales order for credit approval prior to shipment
to shipment.
(sample)
Sales invoices are checked to pricing, mathematical
- Inquiry on the updating of price list.
accuracy and terms
- Examine copies to determine that they contain signature
that they have been checked (sample)
AR subsidiary ledger is balanced to the general ledger
- Observe whether such procedure is being performed.
control account regularly.
- Foot the subsidiary ledger and compare to the balance of
the control account.
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Assertion: PRESENTATION AND DISCLOSURE, sales and accounts receivable are recorded in accordance with PFRS
Sales must be properly classified
- Determine whether the invoice copy contains approval
signature for account classification used.
II.

SUBSTANTIVE TEST OF SALE TRANSACTIONS

ASSERTIONS
AUDIT OBJECTIVES
a. Occurrence and Validity
To determine that recorded sales are
b. Rights and Obligations
authorized and are for shipments
actually made to real customers.

c.

Completeness

To determine that existing sales

transactions are recorded on a timely
basis.

d.

Valuation or Allocation

To determine that recorded sakes are

for the amount of goods shipped and
are correctly billed and recorded.

e.

Presentation

To determine that sales transactions

are properly classified.

AUDIT PROCEDURES
Review sale journal, GL and accounts
receivable masters file or TB.
2. Trace sales journal entries to supporting
documents.
3. Trace shipping documents to entry of
shipments in perpetual inventory records.
4. Compare prices on sales invoice with
authorized price list or contracts.
5. Trace shipping documents to sales invoices
and entry to sales journal and AR master file.
6. Compare date sales are recorded and date on
shipping records (perform sales cutoff test)
7. Recompute information on sales invoices.
8. Trace entries in sales journal to sale invoices.
9. Trace details on sales invoices to related
documents.
10. Examine document supporting sales
transactions for proper classification.
1.

III.

TEST OF CONTROLS OVER SALE ADJUSTMENTS TRANSACTIONS

Cash Discounts substantive test of account balances
Sales returns, allowances, corrections emphasis is on testing the existence of recorded transactions as a means of
uncovering any diversion of cash from the collection that have been covered up by fictitious sales returns and allowances
(existence); understatement of these may lead to management reporting overstated net income (completeness)
Uncollectible Accounts most important audit objective is existence because of the possibility that the management may
use this account to cover up misappropriations of company assets. The control to prevent this is to employ proper
authorization when writing off uncollectible accounts

IV.

SUBSTANTIVE TEST FOR SALES RETURNS AND ALLWOANCES

The same audit objectives with sales except for the following:
(1) Materiality if amount reflected in the CMs are immaterial, they can be ignored
(2) Emphasis on the objective emphasis is on testing the validity of recorded transactions as a means of uncovering
any diversion of collections that has been covered by a fictitious sales returns and allowances
Audit procedures normally include:
- Review of the use and authorization of CM; CMs must be serially numbered signed by an employee separate from the
handling of cash or maintenance of the customers ledger
- Review of credits for returned merchandise supported by receiving report on the return shipment
- Verify prices, extensions and footings.
- Trace postings from sales returns journal and other accounting records to the customers accounts in the SL

V.

TEST OF CONTROLS OVER CASH RECEIPTS TRANSACTIONS

CONTROLS
TEST OF CONTROLS
Assertion: EXISTENCE/OCCURRENCE, recorded receipts represent actual cash collections from customers
An employee prepares a prelisting of cash receipts
- Observe whether a prelisting is prepared
- Inquire about the procedures followed by the employee
A validated receipt is obtained for deposits and compared
- Compare the validated slips to the cash receipts summary
to cash receipts summary
Segregation of duties: handling cash and posting to AR
- Observe the separation of duties
- Inquire from personnel about their responsibilities.
Preparation of a bank reconciliation by a person
- Observe whether a bank reconciliation had been prepared
independent if cash, AR, or GL records
by an independent employee
Assertion: COMPLETENESS, all receipts are processed and recorded
Prelisting and monitoring of cash register procedures
- Observe the monitoring of this procedure
Checks are restrictively endorsed immediately after
- Observe whether the procedure is followed.
receipts.
Preparation of daily cash summary and reconciliation of
- Inquire from responsible employees about the regularity
OTC receipts and prelisting.
and consistency of the performance of this procedure.
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Reconciliation of cash receipts journal to the total posted to

AR

Observe the procedures.

Inquire from employees who perform the procedures.

Assertion: RIGHTS AND OBLIGATIONS, all cash receipts are deposited in the bank account of the client
Cash receipts are deposited intact daily in the companys
- Observe whether the procedure is followed
bank account
- Compare cash in the prelisting and validated deposit slip.
Assertion: VALUATION AND ALLOCATION, the DR to cash and CR to AR are valued at amount actually received
Cash receipts should be recorded at the amount indicated
- Compare entries made in the cash receipts journal to
in the remittance advice
remittance advices.
Assertion: PRESENTATION AND DISCLOSURE, cash receipts transactions are recorded in accordance with PFRS
An accounting supervisor approves classifications made in - Determine whether the accounting supervisor approval is
journalizing
recorded.
VI.

SUBSTANTIVE TESTS OF CASH RECEIPTS TRANSACTIONS

ASSERTIONS
AUDIT OBJECTIVES
a. Existence or occurrence To determine that recorded cash
receipts represent actual collection
from customers.

1.

b.

Completeness

To determine that all cash and

checks are recorded.

3.

c.

Valuation or Allocation

To determine that debits to cash and

credits to AR are values at amounts
received.

4.

To determine that cash receipts

transactions are presented and
disclosures are prepared in
accordance with PFRS.

6.

d.

Presentation

2.

5.

AUDIT PROCEDURES
Trace cash receipts journal to prelisting of cash
receipts and to remittance advice. (sample)
Reconcile daily deposits to validated deposit
ticket. (from a sample of entries)
Reconcile daily listings and validated deposit
ticket to cash receipts journal to verify that all
cash receipts are recoded
Examine remittance advice and verify that
discount taken was appropriate (sample)
Foot AR subsidiary ledger and reconcile with
GL account.
Review account coding in the cash receipts
journal (sample).

B. EXPENDITURE AND DISBURSEMENT CYCLE

Activities involved: (1) Acquisition of goods and services; (2) payment for these acquisitions
Accounts affected: (1) Purchases and related adjustments, (2) Accounts payable and trade notes payable, (3) cash in
bank, (4) inventories, and (5) manufacturing and operating expenses
Documents used and Audit Significance
Documents
Significance
Purchase requisition
- C Provides evidence that the purchasing department was authorized to initiate
purchase.
Purchase order
- Contains signature of an employee who authorized purchase from a vendor.
Receiving report
- F Provides evidence that goods were received.
Vendors invoice
- B Provides evidence about a purchase of goods or services
Debit Memo
- G Provides evidence that the amount owed to vendor has been reduced.
Voucher
- D Provides documentation for recording of a transaction.
Check
- A A canceled check provides evidence about payments that the entity has made.
Vendors statement
- E Used to determine that all transactions recorded on the statements have been
recorded in the books.
ACTIVITY 1: Match the following audit significance to the documents presented above.
a. A canceled check provides evidence about payments that the entity has made.
b. Provides evidence about a purchase of goods or services
c. Provides evidence that the purchasing department was authorized to initiate purchase.
d. Provides documentation for recording of a transaction.
e. Used to determine that all transactions recorded on the statements have been recorded in the books.
f. Provides evidence that goods were received.
g. Provides evidence that the amount owed to vendor has been reduced.
Accounting records employed: (1) Purchase journal; (2) Cash disbursement file/journal; and (3) Accounts payable master
file/subsidiary ledger
I.

TEST OF CONTROLS FOR ACQUISITION

CONTROLS
TEST OF CONTROLS
Assertion: EXISTENCE/OCCURRENCE, recorded acquisitions are for items that were acquired
Acquisitions approved by authorized personnel as
- Examine the approval signature.
evidenced by signature on PO.
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Preparation of voucher for the purchase of goods.

Check signer examine supporting documents and cancel

the documents when paid.

- Observe the procedure.

- Examine file documents.
When vouchers are not prepared:
- Review entries in the purchase journal.
- Examine documents underlying them for authenticity and
reasonableness.
- Examine cancellations on the documents.

Assertion: COMPLETENESS, all acquisitions that occurred recorded

1. Prenumbered receiving reports are used and accounted - D. Observe the procedure and account for the numerical
to determine that a liability is recorded.
sequence of receiving report.
4. Vouchers are prenumbered and accounted ad they are
- B. Observe the procedure and account for the numerical
entered in the voucher register.
sequence of the voucher.
Assertion: RIGHTS AND OBLIGATIONS, recorded acquisitions are the entitys purchases and liabilities
5. Receiving reports are prepared by persons who have
- C. Observe that the procedure is performed.
access to a blind copy of PO details.
Assertion: VALUATION AND ALLOCATION, acquisitions are recorded in the proper amounts.
3. Invoice amounts are verified by reference to the PO and - E. Examine the voucher for signature indicating
receiving report. Mathematical accuracy is also checked.
performance.
Assertion: PRESENTATION AND DISCLOSURE, acquisitions are recorded in accordance with PFRS
2. Employees are required to use a chart of accounts.
- A. Examine the chart of accounts and signature of
employee performing the verification.
Account coding is assigned to one person and checked by
another.
ACTIVITY 2: Identify the following controls as to what assertion they pertain and match the test of control to appropriate
control.
CONTROLS
TEST OF CONTROLS
1. Prenumbered receiving reports are used and accounted to
a. Examine the chart of accounts and signature of
determine that a liability is recorded.
employee performing the verification.
2. Employees are required to use a chart of accounts. Account b. Observe the procedure and account for the
coding is assigned to one person and checked by another.
numerical sequence of the voucher.
3. Invoice amounts are verified by reference to the PO and
c. Observe that the procedure is performed.
receiving report. Mathematical accuracy is also checked.
d. Observe the procedure and account for the
4. Vouchers are prenumbered and accounted ad they are
numerical sequence of receiving report.
entered in the voucher register.
e. Examine the voucher for signature indicating
5. Receiving reports are prepared by persons who have access
performance.
to a blind copy of PO details.
II.

III.

SUBSTANTIVE TESTS OVER ACQUISITION TRANSATION

ASSERTIONS
AUDIT OBJECTIVES
a. Existence or occurrence To determine that recorded
purchases are for items that were
acquired.

b.

Completeness

To determine that purchases that

occurred are recorded.

c.

Rights and obligations

To determine that purchases are the

entitys acquisitions and liabilities.

d.

Valuation or Allocation

e.

Presentation

To determine that purchases are

recorded for proper amounts.
To determine purchases are
presented and disclosures are
prepared in accordance with PFRS.

AUDIT PROCEDURES
Examine underlying documents for authenticity.
Scan voucher register for large or unusual
items.
3. Inspect asset acquired.
4. Trace inventory purchased to perpetual
records.
5. Scan voucher register for duplicate payments.
6. Trace a sequence of receiving reports to
entries in the voucher register.
7. Test cutoff.
8. Account for sequence of entries in voucher
register.
9. Trace from invoices to perpetual inventory
records.
10. Examine vendors invoices.
11. Recompute the invoices and compare invoice
price to purchase order.
12. Check accuracy of accounts on invoices by
reference to chart of accounts
1.
2.

TEST OF CONTROLS OVER CASH DISBURSEMENT TRANSACTIONS

CONTROLS

TEST OF CONTROLS
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Assertion: EXISTENCE/OCCURRENCE, recorded cash disbursement occurred.

Authorized individual signs and mails promptly the checks. - Inquire/observe whether the procedure is followed.
A person independent to handling of disbursement reviews - Inquire whether the procedure is followed.
whether checks are processed on a timely basis.
- Examine outstanding checks list.
Assertion: COMPLETENESS, all cash disbursements made are recorded
Checks are prenumbered and accounted for.
- Observe whether employee who prepares the check
register accounts for the sequence of the checks.
Preparation of bank reconciliation by a person independent - Observe the procedure with emphasis on the segregation
of cash disbursements and cash receipts.
of duties.
- Inspect reconciliation.
Assertion: RIGHTS AND OBLIGATIONS, all cash disbursements made are for obligations of the entity.
Examination of supporting documents before check signer, - Inquire about the segregation of duties.
- Observe whether separation really exists.
who is independent of voucher preparation, signs check.
- Inquire about the check signers procedures for reviewing
documents.
Assertion: VALUATION AND ALLOCATION, amounts recorded are valued at proper amounts.
Verify amounts and calculations on vendors invoices.
- Observe the procedure.
Employee signs voucher after this procedure.
- Examine signature on paid invoices.
Assertion: PRESENTATION AND DISCLOSURE, cash disbursements are recorded in accordance with PFRS
Chart of accounts adequately describe the account to be
- Observe the procedure.
used and account coding and checking is assigned to
different persons.
IV.

SUBSTANTIVE TESTS OVER CASH DISBURSEMENTS

ASSERTIONS
AUDIT OBJECTIVES
a. Existence or occurrence To determine that recorded cash
disbursements occurred.
b.

Completeness

c.

Rights and obligations

To determine that all cash disbursements

made are recorded.

AUDIT PROCEDURES
b. Examine paid checks for appropriate
endorsements.
e. Examine documents underlying payments.
a. Reconcile cash disbursements per books
with cash disbursements per bank.
d. Test bank reconciliation.
e. Examine documents underlying payments

To determine that all cash disbursements

made were the entitys obligations.
d. Valuation or Allocation
To determine that purchases are recorded f. Recalculate invoices paid.
for proper amounts.
e. Presentation
To determine purchases are presented
c. Check accuracy of accounts on invoices.
and disclosures are prepared in
accordance with PFRS.
ACTIVITY 3: Match the following audit procedures with the assertions and audit objectives presented above.
a. Reconcile cash disbursements per books with cash disbursements per bank.
b. Examine paid checks for appropriate endorsements.
c. Check accuracy of accounts on invoices.
d. Test bank reconciliation.
e. Examine documents underlying payments.
f. Recalculate invoices paid.

C. PAYROLL TRANSACTION
Activities involved: (1) acquisition of employee services; (2) compensation
Accounts affected: (1) Salaries Payable; (2) Cash in bank; and (3) Payroll expenses
Documents used and Audit Significance
Documents
Significance
Time Card
- Provides evidence about the validity of the hours employee is paid for working.
Deduction authorization
- Indicates that the employee authorized an amount to be withheld from a
paycheck.
Certification of Taxes withheld
- Indicates that taxes withheld were reported to the various taxing authorities.
Labor ticket and labor ticket summary
- Records specific activity of a laborer and the labor used in production on any
given day.
Payroll tax returns
- Provides evidence that amount withheld are paid to the appropriate authorities.
Other personnel records
- Numerical sequence helps ensure that all write offs are recorded.
Accounting records employed: (1) Payroll register; (2) Employee Earnings Record; (3) Labor Distribution journal; (4) and
General journal
I.

TEST OF CONTROL OVER PAYROLL TRANSACTION

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(2) Inquiry, (2) Observation, and (3) Review

CONTROLS
TEST OF CONTROLS
Assertion: EXISTENCE/OCCURRENCE, recorded payroll transactions occurred
Personnel department authorizes the addition of an
- Observe the procedures followed
employee to the payroll or any changes in employees
- Examine written approvals for selected payrolls
status
Segregation of duties between the employee who reviews
- Observe this procedure.
details of payroll and signs checks, and another for
distribution of checks
Requiring supervisor approval for hours entered in the time - Observe whether the procedure is followed.
cards
Assertion: COMPLETENESS, all payroll earned by employees is recorded
Prenumbered checks and accounted for in the bank
- Observe whether the reconciliation is routinely prepared
reconciliation done by a personnel separate from the
by a person independent of the payroll function.
payroll preparation
Assertion: RIGHTS AND OBLIGATIONS, recorded payroll transactions are for services received.
Employees are required to record the time work using a
- Observe whether such procedure is being followed.
time clock
- Examine signature on card.
Assertion: VALUATION AND ALLOCATION, payroll transactions recorded for proper amount.
Verification of accuracy of payroll calculations.
- Examine payroll register for signature indicating
verification.
Control total of hours worked and verified independently of - Examine worksheet that documents the comparison.
payroll accounting and compared to hours for which
payment is recorded
Assertion: PRESENTATION AND DISCLOSURE, payroll transactions are recorded in accordance with PFRS
Employees use chart of accounts in assigning codes for
- Examine payroll summary for the signature indicating that
labor charges. Another employee would check work of the
this procedure is being followed.
employees who assigned the codes.
II.

SUBSTANTIVE TEST OF PAYROLL TRANSACTIONS

ASSERTIONS
AUDIT OBJECTIVES
a. Existence or Occurrence To determine that recorded
payroll transactions occurred.

b.

Completeness

To determine that all payroll

earned by employees is
recorded.

c.

Rights and obligations

d.

Valuation or Allocation

To determine that recorded

payroll transactions are for
services received.
To determine that payroll
transactions are recorded for
the proper amounts.

e.

Presentation

AUDIT PROCEDURES
Check the personnel records to determine whether
the employees are actually employed.
2. Observe actual payroll distribution.
3. Investigate the method of the company in handling
unclaimed pay.
4. Trace payroll tested to summaries.
5. Trace postings to summary totals to the GL and
subsidiary ledgers.
6. Check propriety of the accounting distribution.
7. Examine the canceled employee payroll checks for
propriety.
8. Examine receipts signed by employees.
9. Check the recorded pay against the original record
for hours worked or units produced.
10. Compare the rates paid with authorization
forms/contracts.
11. Check computations and deductions
12. Compare the total amount of payroll tested with
appropriate recorded disbursements from general
bank account.
1.

To determine that payroll

transactions are recorded in
accordance with PFRS.
D. FINANCING AND INVESTING TRANSACTION CYCLES
Activities involved: (1) planning the cash need; (2) raising capital; and (3) investing funds
*cover the non operating activities of the company
Financing Transactions:
1. Borrowing from third parties excluding open trade accounts with creditors (short term and long term)
2. Share capital and dividend transactions share issuance and reacquisition, shares returned and dividend
declarations
*Authorizing, executing, and recording transaction
Investing Transactions:
1. Acquisitions and disposals of financial assets
2. Lending to third parties, other than open trade accounts with customers

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Accounts affected:
(1) Notes Payable (non trade);
(2) Bonds Payable;
(3) Mortgage Payable
(4) Long term Liability (finance lease)
(5) Share capital
(6) Investment in securities
(7) Accounts Receivable (non trade)
(8) PPE and related adjustment

(9) Intangible assets

(10) Cash in Bank
(11) Interest Expense (Payable)
(12) Share premium
(13) Retained earnings
(14) Treasury Shares
(15) Dividends
(16) Capital Account

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Documents used and Audit Significance

Documents used in the expenditure cycle.
Documents
Significance
Share Certificate
- Shows the number of shares owned by a shareholder.
Bond Certificate
- Shows the number of binds owned by a bondholder
Bond Indenture
- (contract) States the terms of the bond issue
Brokers Advice
- Specifies the details of an investing transaction.

I.

INTERNAL CONTROL OVER FINANCING TRANSACTION

*Three operative objectives: proper execution, recording and custody of assets
EXISTENCE OR OCCURRENCE & RIGHTS AND OBLIGATIONS: Financing cycle transactions actually occurred.
a. The BOD authorizes the issuance of long term notes, bonds, and share capitals, the legal requirements and
proceeds are promptly deposited intact.
b. Authorized (BOD or management) payments of interest and dividends to proper payees.
c. Authorized execution of redemption and reacquisition of bonds and share capital transactions.
d. Notes are cancelled when they are paid to avoid double payment.
e. Recorded balances are periodically verified with bondholders and shareholders
VALUATION/COMPLETENESS/CLASSIFICATION: Financing cycle transactions are properly valued and recorded.
a. Transactions and events are correctly recorded as to amount, classification, and accounting period.
b. Transactions are promptly and correctly posted to individual accounts.

II.

TESTS OF CONTROL SUBSTANTIVE TESTS OF FINANCING CYCLE TRANSACTIONS

o Conduct test of compliance since transactions are few in volume but large in value; follow the approach of
substantiating the individual transactions
III.

INTERNAL CONTROL OVER INVESTING TRANSACTION

*Audit risks are kept at a very low level because
- infrequent occurrence of the transactions
- effective control can be implemented at a little cost
*Three operative objectives: proper execution, recording and custody of assets
EXISTENCE OR OCCURRENCE & RIGHTS AND OBLIGATIONS: Investing cycle transactions actually occurred.
a. The management authorizes the acquisition/sale of PPE, securities and intangible assets.
b. Interest and dividends checks are promptly deposited intact.
c. Access to PPE, securities and intangible assets are restricted to authorized personnel.
d. Recorded balances are compared with existing assets at reasonable intervals.
VALUATION/COMPLETENESS/CLASSIFICATION: Investing cycle transactions are properly recorded.
c. Transactions and events are correctly recorded as to amount, classification, and accounting period.
d. Transactions are promptly and correctly posted to individual accounts investment.

IV.

TESTS OF CONTROL SUBSTANTIVE TESTS OF FINANCING CYCLE TRANSACTIONS

o Test of control is limited because the number of transactions are relatively small.
o The auditor may decide to proceed directly to substantive tests of balances after a preliminary review of the flow
of transactions through the accounting system. (cost benefit relationship)
o When the entity has an extensive investment portfolio and numerous transactions, the auditor may decide to
complete his review of internal control and perform compliance tests on the controls.
Test of Control
1. Trace transactions for purchases and sales of PPE, securities and intangible assets through the system.
2. Review reports by internal auditor on their periodic inspections to PPE, securities and intangibles.
3. Review monthly reports by officer of client company on securities owned, purchased, and sold, and revenue earned.
4. Review significant changes in the composition of PPE and related liens and mortgages.