MGAD10H3 Lecture Notes - Fide, Accrued Interest, General Ledger

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11. 1 relationship between risk assessment and substantive procedures. In chapter 10, bs accounts include the use of confirmations, vouching of balances back to third-party supporting evidence, and tests of completeness and cut-off of the balances on either side of the year end. Bs accounts are made up of a portion of is transactions. Is accounts are audited when the related bs accounts are audited. If auditing is accounts is different from bs accounts, auditors use substantive analytical procedures coupled with some tests of details (vouching) and verification of expense classifications. Extent of substantive procedures and timing of substantive procedures. Sales revenue is usually a significant account for an entity (except start-ups) because of its size (materiality), the volume of transactions that flow through the account (high), and the overall high inherent risk associated with the account. Testing needs to ensure that sales recorded in the general ledger are in fact bona fide sales and have occurred.

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