How to test for completeness of purchases or expenses?
The completeness assertion is critical for purchases/expenses as there is a risk that the company understates expenses in the financial statements so that profit can be overstated.
To test for completeness, the audit team should sample purchase orders, receiving reports, and invoices and trace them to the purchase journal (the purchase journal should reconcile with expenses in the financial statement).
If all of the items sampled are properly included in the purchase journal, then the audit team can conclude that the financial states are complete or include all purchases.
You might also be interested in...
Are you looking for a CPA review course?
Universal CPA Review is the only CPA review course that has explanation videos for every single multiple choice question. These videos focus on helping identify the big picture and developing a systematic approach to tackling the concept. Our content creators are masters of their craft. They know what it takes to pass the exam and […]
How is audit risk impacted with changes in the assessment of inherent risk, control risk, and detection risk?
Audit risk is the combination of inherent risk, control risk, and detection risk. Remember, the audit team will “assess” inherent risk and control risk. Based on the assessment, then audit team will set detection risk, which ultimately impacts the amount of substantive procedures that must be performed. So in the visual below, you can see […]
Scores Came Out: I Just Got a 73% on Audit, Now What?
Yesterday morning a student interested in trying Universal CPA Review reached out and expressed concern with the fact that they just took audit for the fourth time and scored a 73%. Audit is a lot of candidate’s “kryptonite” and the reason is because it is sort of like skiing. Easy to learn, extremely hard to […]