THE SUBSTANTIVE TESTS YOU WOULD PERFORM TO VERIFY THE AMOUNTS SHOWN IN PROPERTY PLANT

AND EQUIPMENT (NCA) IN THE COMPANY ’S ACCOUNTS FOR THE CURRENT YEAR .

Existence:
 Obtain the list of additions made in the non-current assets and review the description of the
invoices to ensure that they actually relate to purchase of assets and not merely repairs and
maintenance.
 Select assets from NCA register and inspect them physically to verify their existence.
 Review the documents related to disposal and list of assets to make sure that all the disposed
assets have been removed from the non-current asset register.

Valuation:
 In case of assets that were revalued, review the valuation report prepared by the expert and
confirm that the revalued amount recorded in the financial statement and non-current asset
register match.
 Ensure that at the time of revaluation of a particular asset, all the assets of that class have been
revalued altogether.
 For disposed assets, the profit gained, or loss incurred should be reviewed to confirm that the
depreciation policy of the company is reasonable. If the policy is appropriate, there shouldn’t be
significant profit or loss at disposal.
 Re-calculation of the depreciation amount to ensure its arithmetical accuracy and compare the
rates of depreciation with industry average to confirm their reasonableness.

Rights & Obligations:

 Review the relevant legal documents related to the ownership of the asset. Inspect the title
deeds for property, land, and buildings. Review the registry documents in case of vehicle
ownership.
 Inspect the lease documents, insurance policy documents for further confirmation regarding
ownership and control of the assets.

Completeness:
 Select a sample of assets that are visibly in use by the company to confirm and get a surety that
they are included in the non-current asset register.
 Inspect repairs and maintenance accounts for larger items of non-current asset register that
may be asset by nature.
 Since most NCA disposals are done with an intention to replace an existing asset, review the
disposals and purchases whether they match to ensure any unrecorded subsequent additions
have been performed.

Presentation & Disclosure:

 Scrutinize the amounts recorded in the non-current asset register and balances of financial
statements agree in totals, and they are recorded in appropriate where class they belong.
 Ensure that the brought forward balances from the prior year financial statements are accurate.
THE SUBSTANTIVE TESTS YOU WOULD PERFORM TO VERIFY THE AMOUNTS SHOWN IN TRADE RECEIVABLES
IN THE COMPANY ’S ACCOUNTS FOR THE CURRENT YEAR .

Existence:
 Take a sample from the receivables balances at the year-end and review whether it matches
with the relevant supporting documents like GDNs and Credit Sales Invoices.
 After obtaining client’s permission, request a direct confirmation from the customers of the
client by receivable circularising to ensure that the balances exist in the customer’s books of
accounts as well.

Valuation:
 Obtain aged receivable analysis and inspect to identify and if any old/slow-moving balances
exist. If they exist discuss with the relevant management team to assess whether they require to
create an allowance or written off as irrecoverable debts.
 Review the post-year end cash receipts from the outstanding customers to ensure their
balances has been removed from the receivable ledger for accurate valuation at the year-end.
 Re-perform the calculation of the provisions that are created for the allowances and
irrecoverable debts to ensure valuation.
 Inspect the credit notes sent to the customers up to the year-end and if the original invoices
relate to prior year sales, make sure that their balances have been written off and not included
in the receivables anymore.

Presentation & Disclosure:

 Obtain the receivable control account and check whether the balances of the control account
and financial statements match and are accurate.
 Analyze the aged receivable analysis report and confirm that the receivable balances that are
unlikely to get paid or haven’t been paid since long time are either written off or booked as
provision for doubtful debts in the financial statements.

Cut-Off:
 Inspect whether the GDNs and sales invoices match up with the receivable balances and any
post year balances haven’t been included as current year balances.
THE SUBSTANTIVE TESTS YOU WOULD PERFORM TO VERIFY THE AMOUNTS SHOWN IN TRADE PAYABLES IN
THE COMPANY ’S ACCOUNTS FOR THE CURRENT YEAR .

Completeness:
 Obtain the list of the prior year supplier balances and compare with the current year supplier
balances and seek explanations for any missing or sudden inclusion of some new suppliers.
 Take a sample of purchase orders sent by the customers to make sure that they match through
the GRNs, purchase invoices, and respective supplier’s payables balances.

Valuation:
 After obtaining client’s permission, request a direct confirmation from the customers of the
client by payables circularisation to ensure that the balances exist in the customer’s books of
accounts as well.
 Reconcile the payables control balances at year-end with the individual supplier’s payable ledger
accounts to confirm whether they agree in valuations.
 Obtain aged payables analysis report to identify if any suppliers have unpaid balances for a long
time. If it is so, then, ask for the management to record as income in the financial statements.
 Inspect for any negative payable balances by checking the year end payable ledgers. If any
negative balances exist, it may be possible that it is a receivable balance instead of negative
payable balance.

Cut-Off:
 Inspect whether the GRNs and purchase invoices match up with the payable balances and any
post year balances haven’t been included as current year balances.

THE SUBSTANTIVE TESTS YOU WOULD PERFORM TO VERIFY THE AMOUNTS SHOWN IN PROVISIONS IN THE
COMPANY ’S ACCOUNTS FOR THE CURRENT YEAR .

 Obtain a breakdown of the items which require provision to be created for and cast it to confirm
arithmetical accuracy and agree the figure to the financial statements.
 Enquire with those charged with governance and inspect relevant supporting documents to
confirm that a present obligation actually exists at the year end.
 Discuss with the expert/legal advisor/valuator and inspect relevant board minutes to ascertain
the likelihood of the payment.
 Re-calculate the provision and inspect whether components of the calculation agree with
supporting documents to verify completeness.
 Inspect post year-end bank statements to identify whether any payments have been made,
compare actual payments to the provision and assess whether the provision is reasonable to
verify valuation.
  Request a written representation letter from management regarding their explanation on the
appropriateness of provision provided and its completeness.
 Inspect disclosure of the provision in financial statements to ensure compliance with IAS 37 to
verify presentation and classification.

THE SUBSTANTIVE TESTS YOU WOULD PERFORM TO VERIFY THE AMOUNTS SHOWN IN INVENTORY IN THE
COMPANY ’S ACCOUNTS FOR THE CURRENT YEAR .

 Select a sample of items from the inventory count sheets and physically inspect the items in the
warehouse to confirm their existence.
 Select a sample of physical items from the warehouse and trace to the inventory count sheets to
ensure that they are recorded accurately to verify completeness.
 Enquire of management whether goods held on behalf of third parties are segregated and
recorded separately to assure ownership.
 Inspect the inventory being counted for evidence of damage or obsolescence that may affect
the net realisable value to ensure valuation.
 Examine the post year-end credit notes to determine whether there have been returns, which
could signify that the write off from inventory is required.
 Obtain a sample of inventory items and inspect whether or not any general/non-production
overheads are included in inventory valuation.
 Re-calculate inventory turnover ratio or inventory days and compare with prior year to assess
any items are being held for longer period and require write off to bring down the value to
lower of cost or NRV to verify valuation.

THE SUBSTANTIVE TESTS YOU WOULD PERFORM TO VERIFY THE AMOUNTS SHOWN IN DEPRECIATION IN
THE COMPANY ’S ACCOUNTS FOR THE CURRENT YEAR .

 Inspect depreciation charged on assets for the year recorded in trial balance and statement of
profit and loss and ensure they agree.
 Re-calculate the depreciation charged on assets to confirm its arithmetical accuracy.
 Compare the depreciation policy applied by the company depending on asset categories with
the industry averages and investigate any significant discrepancies.
 Obtain a breakdown of depreciation on asset categories and compare to prior year. If any
significant changes have occurred discuss with the management and request explanation.
 Inspect the enhancement expenditure for upcoming years to assess the appropriateness of the
useful economic lives recognized by the management.
THE SUBSTANTIVE TESTS YOU WOULD PERFORM TO VERIFY THE AMOUNTS SHOWN IN DIRECTOR’S BONUS
IN THE COMPANY ’S ACCOUNTS FOR THE CURRENT YEAR .

 Obtain schedule of directors bonus and review the schedule to examine its accuracy and ensure
it agrees with the amount disclosed in financial statements.
 Review the list of current liabilities from financial statements and confirm the bonus accrual is
included as a year-end liability.
 Confirm the amount of each bonus paid by agreeing to the post year end Cashbook and bank
statements.
 Review the board minutes to obtain surety on the declaration of director’s bonuses and obtain a
written representation letter from management to confirm its completeness.
 Review the recording and disclosers made regarding the bonus payment and assess whether it is
compliance with relevant accounting standards.

THE SUBSTANTIVE TESTS YOU WOULD PERFORM TO VERIFY THE AMOUNTS SHOWN IN BANK LOANS IN THE
COMPANY ’S ACCOUNTS FOR THE CURRENT YEAR .

 Obtain a schedule of opening and closing loan balances to verify any changes during the year.
Inspect whether the balances in trial balance match with the draft financial statements to assure
accuracy.
 Re-calculate the interests on the loans to ensure arithmetic accuracy of finance costs included in
financial statements.
 After client’s permission, request a direct confirmation with the bank regarding
mortgages/security, outstanding amount, and loan amounts to confirm rights and obligations.
 Inspect bank confirmation letter to examine whether any loans agreed remained unrecorded in
the financial statements.
 Inspect the bank statement and cash book regarding loan repayments to verify existence and
valuation.
 Review the a/c treatment and disclosers as well as split between current and non-current
liabilities and ensure it is in accordance with relevant accounting standards.

THE SUBSTANTIVE TESTS YOU WOULD PERFORM TO VERIFY THE AMOUNTS SHOWN IN REVENUE IN THE
COMPANY ’S ACCOUNTS FOR THE CURRENT YEAR .
  Compare the overall level of revenue against prior years and budget for the year and investigate
any significant fluctuations.
 Inspect the GDNs both pre and post year and follow through sales invoices to ensure that cut-off
has been correctly applied.
 Select a sample of invoices for customers and review the sales prices included in the initial sales
order to confirm accuracy of the invoices.
 Re-calculate the final gross profit margin and compare with prior year and investigate any
significant fluctuations.
 Select a sample of customer orders and review whether it agrees with Goods Dispatch Notes
and Sales Invoices amount recognized in ledgers to verify completeness.
 Inspect credit notes issued by the company and ensure that respective transaction have been
reversed from revenue.

THE SUBSTANTIVE TESTS YOU WOULD PERFORM TO VERIFY THE AMOUNTS SHOWN IN RESEARCH &
DEVELOPMENT IN THE COMPANY’S ACCOUNTS FOR THE CURRENT YEAR.

 Obtain the list of research and development expenditure, inspect them thoroughly to ensure
that amount in trial balance agree with draft financial statements.
 For research expenses, examine the supporting documents to obtain surety about their
inclusion in profit and loss as expenses.
 For development expenses, inspect the invoices and review whether they comply with the
criteria for capitalization required by IAS 38.
 Re-calculate the amortization charge on intangible assets and ensure that they are in line with
the policy put in place by the company. Also, verify that amortization was only charged when
asset was brought in use.
 For new development project, discuss with the management about the likelihood of the project
of being completed and assess the development stage to confirm whether it has to be
capitalized or written off as expense.
 Review the recording and disclosures performed by the management and inspect in detail to
ensure its compliance with IAS 38.