FIXED ASSETS

ADDITIONS: 1. Select a sample of fixed assets additions.

2. Vouch the selected sample to the supporting documents,
such as vendor invoices and purchase agreements.
3. Perform physical inspection on the selected items to
ensure their existence.
4. Check and verify to ensure that the additions have been
properly recorded in the fixed assets register and general
ledger.
5. Check and verify to ensure that they meet the condition
to be capitalized.

DISPOSALS: 1. Select a sample of fixed assets disposal.

2. Vouch the selected sample of disposal to the supporting
document, such as title transfer, fixed assets bill of sale,
and sale receipt.
3. Recalculate gain or loss on disposal.
4. Check and verify to ensure that the gain or loss on
disposal reflects in the income statement.
5. Check and verify to ensure that disposal of fixed assets
has been removed from the balance sheet by reducing
the assets account.

DEPRECIATION: 1. Review the client’s depreciation method to ensure it

conforms with applicable accounting standards.
2. Examine the useful life and salvage value of fixed assets
to ensure that the client’s estimate is appropriate.
Compare the client’s estimate with the industry standard.
3. Perform recalculation on depreciation to verify the
accuracy of the client’s figures. This ensures audit
assertion of accuracy.

CHANGE IN POLICY: 1. Discuss with management the rationale for changes to

depreciation rates, useful lives, residual values, and
depreciation methods, and ascertain how these changes
were arrived at.
2. Confirm the reasonableness of these changes by
comparing them with industry averages and knowledge
of the business.
3. Inquire whether the change in policy has been approved
by the board of directors.
4. Evaluate whether the change in accounting policy has
been properly accounted for and adequately presented
and disclosed.
 PROVISION ON LITIGATION
COMPLETENESS 1. Obtain a list of cases and a list of
legal advisors from the client.
2. Scan the general ledger of legal
expenses to ensure that all legal
cases have been identified by the
client.
3. Review minutes of the board
meetings.
EXISTENCE Circulate confirmation to legal advisors
of the company.
VALUATION 1. Evaluate confirmation response to
ensure the expected amount of
liability is recorded or disclosed.
2. Review correspondence between
the legal advisor and client.
3. Verify the reasonableness of the
assumptions used in recording the
provision.
RIGHTS AND OBLIGATIONS 1. Evaluate confirmation response to
ensure whether the provision
should be recognized or disclosed.
2. Consider involving the firm's own
legal advisor to assess the
probability of outflow.
PRESENTATION AND DISCLOSURE Ensure that proper disclosure of
contingent liabilities has been made as
per IFRS.

New Case Identified but Not Disclosed by Legal Advisor in Confirmation:

1. Ask management whether they have communicated this case to the legal advisor.
2. If management says the case has not been communicated to the legal advisor,
ask management to communicate the case and request the legal advisor to send
confirmation again.
3. Evaluate confirmation response to ensure the expected amount of liability is
recorded or disclosed.
4. Review correspondence between the legal advisor and client.
5. Verify the reasonableness of the assumptions used in recording the provision.
 DEBTORS
COMPLETENESS 1. Provide list of debtors, check
mathematical accuracy and trace he
total back to GL
2. Compare current year list of debtors
with previous year & make sure that
usual debtors are appearing
3. Obtain subsequent bank statement to
verify clearance and trace it back to
sales ledger.
EXISTENCE Send confirmation request to debtors
In case of response for confirmation:
i) If balances matched, PARTY!
ii) If balances did not match, inquire
whether it’s a misstatement or
timing gap
In case of no response for confirmation:
I) Follow up
II) Check subsequent bank statement
to verify clearance
III) Perform invoice testing (SO, GDN,
Invoices etc.)

VALUATION 1. Obtain aging report of receivables

2. Identify & inquire about long
outstanding balances & further review
of customer’s response.
3. Mathematical accuracy
4. Comparing balances of debtors with
amounts appearing on supporting
docs (invoice testing).
5. Check reasonableness of doubtful debt
provision.
6. Check subsequent clearance and
whether it has been recorded.
7. Perform cutoff at year end
RIGHTS AND OBLIGATIONS Verify titles deeds and invoices
PRESENTATION & DISCLOSURE Check whether disclosure has been given as
per IFRS and applicable laws.
 INVENTORY
COMPLETENESS 1. Obtain stock report from client, check
mathematical accuracy and trace amount to FS
2. Also select a sample of physical items and ensure
they are included in stock sheet (floor to sheet).
3. Inquire whether any stock is kept at 3rd party (see
correspondence with the 3rd party)
4. If management says these goods pertains to
some other entity, then we need to verify the
supporting documents (Such as
correspondence).
5. If management says that these goods have been
sold and have been kept by the company then
we need to verify the sales order and the
correspondence with the customer evidencing
the request
EXISTENCE 1. Observe stock count and perform sheet to floor.
2. For inventory kept with 3rd party, wither visit for
stock count observation or send confirmation
3. Consider involving expert
VALUATION 1. Inventory count
2. Recalculate value of inventory by multiplying
Quantity with Price.
3. For a sample of inventory, vouch them to
supporting docs such as PO, GRN, Invoices etc.
4. Keep a check on obsolete inventory during stock
count
5. For obsolete stock, check subsequent sales to
verify NRV.
6. Obtain aging report to verify long outstanding
inventory & request management to book NRV
losses.
RIGHTS AND OBLIGATION 1. Review purchase invoices/agreements to verify
that inventory genuinely belongs to the
company.
2. Check to see if there is any inventory held for the
third party and if there is, make sure it is not
included in the balance sheet and appropriately
separated from other inventory during the
inventory count.
 SALES REVENUE
COMPLETENESS 1. Obtain sales report, check mathematical accuracy and trace
total of sales to financial statements.
2. Scan the sequential number of sales invoices in the sales
journal; ensure that the missing numbers are not unrecorded
sales and have an appropriate explanation for.
CUTOFF 1. Select a sample of sales invoices around the year-end
2. Inspect the dates on the invoices and compare them with the
dates of dispatch of goods and trace to the dates recorded in
the sale journal and accounting record to ensure the correct
accounting period entries.
3. Select a sample of return documents (for sale returns) around
the year-end and trace to the related credit entries.

OCCURRENCE 4. Select a sample of recorded sale revenue transactions

5. Vouch the selected transactions to sale invoice to ensure
transactions recorded are based on sale invoices.
6. Trace sale invoice to customer order and bill of lading to ensure
sales have actually happened and goods have been shipped to
customers
7. Scan sale journal for duplicate journal entries
ACCURACY 1. Select a sample of sale invoices.
2. Verify the selected sale invoices with supporting documents to
makes sure they are accurately prepared.
3. Trace sale invoices to sale journal and accounting record to
make sure they are recorded at the correct amount.
Procedures on "Revenue Recognition" when there is a possibility of different performance
obligations:
1. Obtain an understanding of management process related to recognition of revenue.
2. Ensure that transaction prices have been allocated to different performance obligation
appropriately.
3. Ensure that the revenue is not overstated and the number of services is recorded only
at the time of provision of such service/ settlement of obligation
Procedures on "Revenue Recognition" when there is a revenue recognition on stage of
completion basis:
1. Obtain contract from the management to assess contract price.
2. Evaluate reasonableness of the total estimated cost by reviewing past trends of similar
projects.
3. On sample basis vouch cost incurred to date.
4. Ensure reasonableness of the overheads (if any) allocated to contract.
5. Recalculate any allocation of overheads to contract.
6. Recalculate stage of completion
Recalculate revenue recognized based on Stage of completion
 TRADE PAYABLES
COMPLETENESS 1. Provide list of debtors, check mathematical accuracy
and trace he total back to GL
2. Compare current year list of debtors with previous
year & make sure that usual debtors are appearing
3. Obtain subsequent bank statement to verify clearance
and trace it back to sales ledger.
4. Obtain accounts payable listing from the client. check
mathematical accuracy and trace total to the general
ledger or financials to ensure their balances are
matched.
5. Select a sample of suppliers' statements and reconcile
them to the accounting records.
6. Test for unrecorded liabilities by examining the
transactions after year-end and those of unrecorded
invoices.
EXISTENCE 1. Select a sample of payable balances and circulate
confirmations.
2. Follow up any non-replies and any reconciling items
between the balance confirmed & the trade payables'
balance.
3. Select a sample of payable accounts and vouch them
to the supporting documents, such as purchase orders
and suppliers’ invoices.
VALUATION 1. Selecting a sample of payable accounts and agreeing
them to the supporting documents. such as purchase
orders and suppliers' invoices.
2. Reconciliation between a sample of suppliers'
statements and payable accounts also ensure
valuation.
3. Ensure that foreign trade payables (if any) are
translated at the closing foreign currency exchange
rates.
RIGHTS & OBLIGATIONS By selecting a sample of payable accounts and agreeing
them to the supporting documents such as purchase orders
and suppliers’ invoices.
 REVALUATION OF PPE
1. Obtain revaluation workings/schedule from the client, check mathematical
accuracy and trace the total of surplus & fair value to the GL

REV SCHEDULE
ASSET TYPE CV FV SURPLUS
XX (FROM FAR) XX XX
XX XX XX XX

2. Obtain management’s expert’s report & inspect

a. Reasonableness of assumptions and methodology used (e.g.:
replacement cost method)
b. FV and trace it to revaluation workings
3. Assess competence, capability & objectivity of the management’s expert.
4. Match FV of assets with recently conducted transactions.
5. Consider appointing auditor’s expert and assess
a. Competence, capability & objectivity
b. Written agreement.
c. Make sure that data provided to expert is the same that of provided to
the management’s expert.
6. Compare FV of assets determined by auditor’s expert with that of
management’s expert.
7. If difference, inquire from management or hold meeting btw auditor’s and
management’s expert.
8. Recalculate surplus
9. Recalculate incremental depreciation
10. Make sure gain on an asset is set off with the same class of asset
11. Make sure surplus and inc dep has correctly been acc for in FS (R/R, R/E).
12.Make sure adequate disclosures have been given according to IAS 16.
a. FSV value
b. Name of the valuer
c. Historical cost carrying amount
 BORROWINGS/LOANS
COMPLETENESS 1. Obtain the schedule of borrowings and
interest at the year-end that includes the
name of the lender, borrowing date,
maturity date, interest date, interest rate,
and balance at the end of the reporting date,
check mathematical accuracy and trace it
back to GL.
2. Obtain and examine the board minutes
relating to new borrowings or repayments.
EXISTENCE/OBLIGATION 1. Send confirmation to banks/lenders,
requiring details of outstanding balance,
interest accrued for the year and mortgages
and charges
2. Inspect loan agreements

ACCURACY/VALUATION 1. Inspect loan agreement to ensure the

amount of loan.
a. Loan amount
b. Repayment frequency
c. Interest rate
d. Collateral
e. Debt covenants
2. Trace loan received and repayments from
the bank statement.
3. Recalculate interest expense.
4. Recalculate debt covenants to check
whether they’re in the breach or not.
CLASSIFICATION 1. Ensure that proper classification of loans
PRESENTATION & DISCLOSURE have been made like short term loans are
classified in current liabilities and long-term
loans are classified in non-current liabilities.
2. Ensure that proper disclosure regarding loan
have been made such as interest rate on
loan, securities given for loan and
personal guarantees.
 RISK OF GOING CONERN

1. Obtain the management's assessment of the going concern assumption in the

company's financial statements. If the management has not conducted such
assessment, request them to prepare a going concern assessment covering at
least the next 12 months.
2. Analyze the assumptions used therein the underlying assumptions used by the
management needs to be supported by the pertinent facts.
3. Read the minutes of the board meeting in which above issues were discussed.
4. If there is a chance of onboarding a new customer, check the correspondence
with the new customer, inspect the agreement with the new customer (if
entered into), and check subsequent sales.

EXPENSES
COMPLETENESS Obtain expenses ledger, check mathematical accuracy and
trace total of expenses to financial statements.
CUT OFF Reviewing the expense transactions around year-end, e.g. ten
days before year-end and after year-end. And examine
whether they are recorded in the correcting period by
vouching to the supporting documents.
OCCURRENCE 1. Select a sample of recorded expenses transactions from
the general ledger.
2. Vouch the selected transactions to the supplier's invoices
to ensure transactions recorded are based on the supplier's
invoices.
3. Trace the supplier's invoices to the purchased orders and
goods received notes (receiving reports) to ensure that the
goods had been received when the expense was recorded.
ACCURACY By agreeing the expense transactions in the general ledger to
supporting documents, such as supplier's invoice, goods
received note (receiving report) and purchase order, we can
ensure both accuracy and occurrence assertion.
CLASSIFICATION 1. By agreeing the expense transactions in the general
ledger to supporting documents ensure whether
classification is correct or not?
2. Scan ledger for unusual expenses.
 TAXES
1. Obtain tax working from client.
2. Evaluate whether adjustments to arrive at taxable income have been made as
per ITO 2001.
3. For complex issues consider appointing auditor's expert.
4. Inspect rate of tax from ITO 2001.
5. Recalculate current tax expense.
6. Recalculate deferred tax on temporary differences.
7. Evaluate reasonableness of the disclosures related to taxation.

LEASES
Risks:
1. Total leases might not be accounted for.
2. Classification of lease
3. Lease term assessment is not correct.
4. Discount rate might be inappropriate.
5. Risk that proper disclosure might not be provided.

Substantive Procedures:
1. Obtain lease schedule from management, Check mathematical accuracy and
match total to the financial statements.
2. Inspect board minutes to identify approval of any new lease agreement.
3. Inspect and scan rental ledger to identify possible lease agreement.
4. Select a sample of leases (Additions) and inspect rental amount, interest rate
(if any) and lease term.
5. If there is no interest rate mentioned in the lease agreement, then assess
whether entity has taken appropriate IRR for purpose of calculations
6. Assess reasonableness of the lease term.
7. Recalculate ROUA and lease liability and match with lease schedules provided
by the client.
8. Recalculate depreciation on ROUA.
9. Recalculate interest expense on lease liabilities.
10. Inspect bank statement to verify payments of rentals.
11. Check reasonableness of the disclosures made in the FS.
 INVESTMENTS
COMPLETENESS Obtain schedule of investments, check mathematical
accuracy and trace total to financial statements.
EXISTENCE 1. Perform direct confirmation with the brokerage (for
investments held by broker).
2. Physically inspect all investments (for investments
held by the client).
3. Vouch new purchases and disposals of investments to
supporting documents, e.g. broker's advice.
VALUATION 1. Recalculate value of investment by multiplying
number of shares / debentures with fair value at
reporting date.
2. Determine whether gains or losses, as a result of
changes in market value, have been properly recorded
3. Recalculate interest income or dividend income from
investments.
RIGHTS & OBLIGATIONS 1. Inquire management about any restrictions placed on
investments.
2. Examine related documents to determine whether
there are any restrictions on investments.

ACCRUALS
1. Obtain or prepare a listing of accruals as at the end of the reporting period.
2. If the list is prepared by the client company, check the calculations and additions for
arithmetical accuracy. Check the amounts in the listing against the balances in the
relevant main ledger expense accounts and ensure that the amounts are the same.
3. Where invoices have been received, or payments made, after the year end, confirm that
the amount accrued appears reasonable in relation to this evidence. For example,
suppose that a company makes an accrual for two months of electricity charges, and
receives an invoice for three months' supply of electricity one month after the year-
end. If the accrual for electricity is, say, Rs. 60,000 (Rs. 30,000 per month), the auditor
should expect the total invoice to be for about Rs. 90,000.
4. Compare the list of accruals with the list that was prepared at the same date in the
previous financial year, and enquire about items not listed in the current year that were
in the list in the previous year.
5. Review the list of accruals for completeness, based on the auditor's knowledge of the
business.
6. Relate items on the list of accruals to other audit areas, such as the bank confirmation
letter (which might provide details of unpaid/accrued bank charges).
 SALARY EXPENSE

1. Obtain payroll data for the year (for each month), check mathematical
accuracy and trace the total back to GL.

2. Prepare expectation (substantive analytics procedures).

3. Select a sample of employees from payroll file and check their salaries from
their employee records /appointment
4. Obtain/extract time in and time out records from the system and check
whether hours for each month have been appropriately reflecting in the payroll
sheet
5. For bonus check BOD approval
6. Check approval of BOD for increment
7. Recalculate salary expense for each month.
8. Check payment of salaries from the bank statements
9. Check that salary expense / salary accrued in a relevant period.
10. for accrued salaries check subsequent payment by obtaining subsequent
bank statements
11. Check whether deductions have been made in accordance with ITO 2001.
12. Check whether tax deducted from the employee's salary have been
deposited timely.
 CHANGE IN ACCOUNTING POLICY
In entity / in question it is given that the
company has changed its accounting policy

RISKS:
RISK #1: There is a risk that accounting policy might have been changed to
manipulate results or it might not be allowed
EXAMPLE: (IP -> Carried at FV -> Cost pe nahi ja saktey) Change in accounting
policy is allowed only when it will result in reliable and more accurate
information
Risk #2: There is a risk that accounting policy impact might not have been
adjusted retrospectively.
Risk #3: There is a risk that retrospective adjustments might not have been
parked correctly.
Risk # 4: Proper disclosures required by IFRS might not have been prepared

PROCEDURES:
1. Evaluate that whether change in accounting policy is reasonable and will
result in reliable and more accurate information.
a. Check whether it is allowed by applicable financial reporting
framework
b. Check whether it is not done to manipulate results
2. Obtain management working of restatement
3. Evaluate whether the change in accounting policy has been accounted for
retrospectively (where practicable)
4. Check management working and perform recalculations
5. Ensure that amounts have been parked in financial statements
appropriately.
6. Ensure that proper disclosures have been as required by IFRS
7. Whether change in accounting policy is approved by BOD.
 INTANGIBLES
COMPLETENESS 1. Review purchase agreements, contracts, and invoices for any
acquired intangible assets.
2. Verify internally generated intangibles (e.g., software, R&D) are
recorded per accounting standards.
3. Cross-check amortization schedules with the general ledger to
confirm all intangibles are included.
VALUATION & 1. Verify that intangibles are recorded at cost or fair value, as required
ALLOCATION by accounting standards.
2. Check the amortization calculations for definite-life intangibles and
ensure compliance with the company’s policy.
3. For indefinite-life intangibles (e.g., goodwill), review the impairment
testing methodology and key assumptions (discount rate, growth
rate, etc.).
4. Compare carrying amounts with market values or comparable
industry data to assess reasonableness.
5. Review the treatment of acquisition costs, R&D capitalization, and
software development costs to ensure proper accounting treatment.
EXISTENCE 1. Confirm existence by reviewing legal documents, contracts, and
registrations (e.g., patent filings, trademark registrations).
2. Verify the physical or operational presence of software, trademarks,
or customer lists through system checks or business records.
3. Obtain third-party confirmations for intangibles acquired from
vendors or through mergers and acquisitions.
RIGHTS & 1. Inspect patent registrations, trademark filings, copyright certificates,
OBLIGATIONS and licensing agreements to confirm ownership.
2. Review legal disputes or contractual restrictions that may limit the
company’s rights to use or transfer intangibles.
3. Check for any licensing arrangements, royalty agreements, or shared
ownership contracts that could affect rights.
4. Verify that intangibles pledged as collateral for loans are properly
disclosed.
CUT OFF 1. Review purchase documents and contract dates to ensure newly
acquired intangibles are recorded in the correct period.
2. Inspect amortization and impairment schedules to verify that
expenses are recorded in the appropriate accounting periods.
PRESENTATION AND 1. Verify that intangibles are correctly classified as either definite-life or
DISCLOSURE indefinite-life in the balance sheet.
2. Check that amortization and impairment losses are disclosed
separately in the financial statements.
3. Ensure compliance with IFRS (IAS 38) disclosure requirements.
 IMPAIREMENT TESTING OF PPE/INTANGIBLES (PROCEDURES)
1. Obtain an understanding of management process related to identifying,
estimating and recording impairments for PPE.
2. Obtain management working related to impairment of PPE, including VIU & its
reasonableness
o Methodology of calculating VIU.
o Check demand of units by obtaining subsequent sales ledger
o Check demand of units by inspecting market research reports
o Evaluate assess reasonableness / accuracy of source data
o Check quantity by evaluating capacity of the company.
o Check internal consistency of the data
o Check appropriateness of discount rate
o Check mathematical accuracy of the model.
o Maker checker principle (Ik bnda working bnae dusra review kry)
3. Review the source data used by the management for impairment testing.
4. Assess the reasonableness of assumptions taken by the management. Such as
by checking subsequent period sales (inflows), subsequent cost incurred,
discount rate used and fair value assessment etc.
5. Consider involving auditor's expert.

Impairment (control testing, not substantive)

1. Understanding management’s process for identifying, assessing & recording
impairment.
a. Obtain cashflow projections of VIU & assess MV of asset
2. Understanding controls over preparation of VIU workings.
a. Working has been prepared by sufficiently qualified individual
b. Experience in relevant field
c. Sales data → sales dept. verify krta hai or pricing → pricing dept.
validate krta (Mtlb jo data projections k bnany k liye bheja jarha wo
sahi h ya nhi)
 INVENTORY (WORK IN PROCESS)
COMPLETENESS 1. Perform a physical count of WIP inventory and compare it to
the recorded amounts.
2. Review cutoff procedures to ensure WIP transactions are
recorded in the correct period
3. Examine production reports to verify that all ongoing jobs are
captured in the WIP ledger.
4. Review material requisition slips and labor hours to ensure all
components of WIP are accounted for.
VALUATION 1. Verify the costing method (FIFO, W.AVG) applied consistently.
2. Review the bill of materials (BOM) to confirm material costs are
accurately assigned.
3. Check labor and overhead allocation by inspecting job cards,
payroll records, and overhead absorption rates.
4. Perform a reasonableness test by comparing unit costs of WIP
to historical and standard costs.
5. Assess whether any WIP should be written down due to
obsolescence, damage, or excessive costs.
EXISTENCE 1. Conduct a physical verification of WIP inventory at the factory
and compare it with inventory records.
2. Perform test counts on selected WIP batches and trace them to
the WIP ledger.
3. Observe production processes to verify that recorded WIP
corresponds to actual manufacturing progress.
RIGHTS & OBLIGATIONS 1. Review purchase records and supplier invoices to confirm
ownership of raw materials used in WIP.
2. Inspect contract manufacturing agreements to check for any
inventory held on behalf of third parties.
3. Verify whether any consigned or pledged inventory is correctly
disclosed in financial statements.
CUT OFF 1. Review the last few production orders before the year-end and
the first few after to ensure correct recording.
2. Check the timing of material issues and labor postings to
ensure costs align with the period of production.
3. Examine shipping and receiving documents to verify whether
WIP movements near year-end are recorded properly.
PRESENTATION AND Check if WIP is separately disclosed in inventory notes along with
DISCLOSURE raw materials and finished goods.
 CASH AND BANK BALANCES
1. Obtain cash listing from management for each location (if applicable, check
mathematical accuracy and trace it back to GL to ensure completeness.
2. Perform/observe cash count to ensure valuation of cash.
3. For performing cut off on cash, check cash receipt/payment vouchers (CPV/CRV).

COMPLETENESS 1. Obtain list of bank accounts from the

management, check mathematical
accuracy and trace it back to FS.
2. Inspect BOD minutes & check
whether there’s any approval for new
bank account
CUT OFF 1. For cash receipts, observe cash counts
at the last date of RP
2. For cash disbursements, check the last
cheques issued at RP and trace it back
to cashbook.
(Applicable on cash as well)
EXISTENCE Circulate external confirmation to all
banks
ACCURACY/VALUATION 1. Obtain bank reconciliation for each
branch, check mathematical accuracy
and trace it back to GL.
2. Make sure non-reconciling items are
not appearing in bank recon.
3. Obtain subsequent bank statement &
check whether uncleared cheques
have been cleared and unpresented
cheques have been presented
CLASSIFICATION, PRESENTATION & 1. Review board of directors' minutes,
DISCLOSURE bank letter, loan agreement or other
documents for any restrictions on cash.
2. Ensure bank loans and overdrafts are
not offset against positive bank balances
in the financial statements