Question

Casey Jones is an auditor on the High End Limited audit engagement for the year ended...

Casey Jones is an auditor on the High End Limited audit engagement for the year
ended 30 June 2012. Jimmy has performed a number of tests in relation to accounts
payable.
A number of suppliers were selected from the list of trade creditors at year end and
balances traced to supplier invoices and goods received notes to ensure goods were
received prior to the year end. For two creditors out of 15 tested the balance was
only
marginally overstated. Casey accepted the result as no material errors located.
Required: Identify whether this is a test of control or substantive test of detail and discuss why
the conclusion reached is appropriate or inappropriate.

Homework Answers

Answer #1

(a) The above procedure performed on the trade payable is SUBSTANTIVE Test of detail.

Test of control are performed for checking whether the internal controls applied by the clients which assist in preparing of financial statements are working effectively or not.

Further, while performing substantive test of detail auditoe cannot do 100% checking; he checks on the basis of sampling. Thus, Conclusion reached by him on the samoling basis, which is performing substantive test on 15, out of which only 2 creditor' sbalances are only marginally overstated , which is immaterial.

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