Essential Procedures for Auditing Assets and Liabilities
General Audit Procedures
Assets
Active Assets: Availability, accounts receivable, inventories, fixed assets.
Liabilities and Shareholders’ Equity
Accounts payable, provision for social benefits, and equity.
Availability (Cash and Bank Balances)
- Require bank reconciliations.
- Review documentary evidence in the cash books.
- Request direct balance confirmations from banks.
- Analyze the source of outstanding check collections and major reconciliations.
- Check the arithmetical accuracy of cash records.
- Verify the correct conversion to the national currency of cash and bank balances.
- Check savings bank balances and obtain deposit certificates.
Accounts Receivable
- Verify that the accounts receivable balance corresponds to the line of business.
- Confirm that sales are invoiced and credit sales are included in the declarations.
- Check balances receivable from shareholders, directors, trustees, partners, owners, taxpayers, and workers. Prepare a list of these balances to detect profit withdrawals or special remuneration subject to RC-IVA (Tax on Remuneration and Value Added).
- Conduct sampling to ascertain whether interest payments were generated.
Inventory (Stocks)
- Order the book inventory management.
- Recount the most significant items.
- For imports, verify the existence of the policy issued by the office and payment of VAT and ICE (Specific Consumption Tax).
- Investigate whether there are charges or withdrawals for donations.
- Investigate penalties for obsolescence losses and supporting documentation.
- In industrial settings, verify special movements like ICE as a means of control, revenue stamps, adhesive labels, and traffic guides.
- Check sample correction of the inventory systems permanent transcript by manual or computer systems and method of recovery.
- Check the correctness of the import costs, acquisition, or production of goods.
Fixed Assets
- Check the physical existence of assets.
- Verify the conformity of all fixed asset acquisitions and their valuation.
- Check the correctness of the depreciation charged to the income statement.
- Request contracted insurance policies and compare them with financial statements.
- Check that outstanding balances paid at the close of management have been paid in the coming months.
- Through third parties, determine the confirmation of the audited balance.
- Verify that items are paid with supporting documents.
- Obtain and prepare a detailed movement of the Taxes Payable account and monitor compliance with obligations.
Provision for Social Benefits
- Require a detailed calculation made by the taxpayer and verify its correctness.
- Check that workers are people who work in the service of the taxpayer.
- Check that social benefits paid during the administration have been charged to the provision and expenditure.
Equity
- Compare the capital increase resolution approved by shareholders with relevant scriptures.
- Investigate capital gains originating from the capitalization of liabilities.
- Investigate the retained earnings account or equivalent during the administration under review.
- Check RC-IVA retention if there are bearer shares.