This Audit Program Guide is a step by step guide for using Validis with the Thompson Reuters PPC Methodology for Audit. It is broken down by the Procedure, Section and Steps you need to take to complete that Step.
Please click on Audit Procedure or Section Number to navigate to that section.
Audit Procedure |
Section |
Audit Steps |
Section Number |
S-2 |
Read any current-year interim financial statements |
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S-8e |
Apply and document preliminary analytical procedures by (1) comparing account balances for the current period to similar amounts in the prior-period annual or interim financial statements or other expectations |
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Other General Planning Procedures |
NONE |
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Other General Auditing and Completion Procedures |
NONE |
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S-2a |
Scan cash receipts and disbursements for significant or unusual transactions (including any bank transfers) near year end (both before and after year end). |
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S-1a |
Compare the balance in trade accounts receivable with the balance for prior periods or other expectation. |
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S-1b |
Compute the ratio of accounts receivable balance to net credit revenue for the current period and compare with the ratio for prior periods or other expectation |
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S-1c |
Compute the number of days revenue in accounts receivable (net accounts receivable divided by average revenue per day) and compare to the ratio for prior periods or other expectation. |
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S-3 |
Scan the aged accounts receivable trial balance for unusual items or items that might require reclassification in the balance sheet. |
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S-5b(2) |
The allowance as a percentage of accounts receivable. |
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S-5b(4) |
Each aging category (under 30 days, 30–60 days, etc.) as a percentage of total receivables. |
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S-8a |
Obtain a schedule for the workpapers summarizing revenue by major product line and geographic location (or other meaningful categories) for the year and by meaningful interim period (e.g., monthly or quarterly). Agree or reconcile the total to the general ledger. |
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S-9 |
Scan the listing of revenue transactions during the period and investigate large or unusual transactions near period end (both before and after). |
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Add'l Procedures - 6a |
Compute the ratio of accounts receivable to current assets, total assets, and/or net worth and compare to the ratios for prior periods or other expectations |
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Add'l Procedures - 7b |
Review the aged trial balance with subsequent collections, credit memos, and write-offs posted |
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S-9A (Test of Rev Details) |
Obtain a listing of the contracts with customers for which revenue was recognized during the period (such as a sales journal). Agree or reconcile the total to the general ledger. |
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S-21b(2) (Test of Revenue Cutoff) |
a. Perform and document the following analytical procedures as a test of revenue cutoff: (1) Compare revenue for the last month of the year to revenue for the rest of the year and the first month after year-end. |
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S-21b(1) (Test of Revenue Cutoff) |
Compare monthly returns, credits, and other elements of variable consideration for the last few months of the fiscal year to the first few months following year-end. |
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S-1 |
Ensure the mathematical accuracy of trial balances |
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S-2a |
Obtain all general ledger entries and test for completeness. |
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Other Audit Procedures for A/R and Revenue |
Not applicable as ASC 606 should be adopted as of 2018 |
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S-2a |
Compare balances of inventory with those of prior periods or other expectations. |
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S-2c |
Compute inventory turnover and compare with the turnover of prior periods or other expectations. |
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S-3b(1) |
Compare and document (including expectations) cost of sales for the last month of the year to cost of sales for the first month after year end. |
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Other Audit Procedures for Inventory and COS |
NONE |
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Add'l Proc 1c |
In conjunction with the cash audit program, identify the last check number(s) written for later testing of held checks. Ask whether there are any checks written that are being held for release after the balance-sheet date. Obtain a list of them. |
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2a |
Compare and document (including expectations) gross profit for the last month of the period under audit to gross profit for the first month of the subsequent period to assess reasonableness of cutoff. |
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S1-a |
Obtain a schedule that summarizes the opening and ending balances in each property and related accumulated depreciation and amortization account and the transactions in each account (additions and retirements, depreciation and amortization expense, transfers or other adjustments, etc.) and that describes the depreciation and amortization methods and lives. |
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Add'l Proc 6a |
Compute the ratio of depreciation and amortization expense to the related property and compare to the ratio for prior periods or other (documented) expectation. Investigate any unexpected results (that is, ratios that differ from what would be expected) considering known changes in client operations. |
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Other Audit Procedures for Property |
None |
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Audit Program for Investments and Derivatives |
None |
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Invest and Deriv - Other Procedures |
None |
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Extended Procedures 2 |
Scan the activity in the account and investigate any unusual entries or absence of entries that would be expected (such as amortization entries) |
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Other Assets Other Procedures |
None |
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S2-b |
Scan the listing of accounts payable and investigate any unusual or old items. |
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S4-a |
1. Perform a search for unrecorded liabilities by performing the following procedures: |
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a. Obtain and examine supporting detail for selected disbursements after the balance-sheet date and determine whether the goods or services on the paid invoices were received on or before the balance-sheet date. If so, determine whether the liability is recorded. Document the source and selection criteria for items tested. (If the entity uses a voucher register, consider performing these procedures on material transactions vouchered after the balance-sheet date.) |
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S7-a |
1. Test accruals and other liabilities by performing the following procedures: |
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a. Scan the working trial balance and determine those accrual or other liability accounts for which additional testing should be performed. |
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Extended Procedures 1 |
1. Test the clerical accuracy of the accounts payable listing. |
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Extended Procedures 2-b |
Scan the listing for large debit balances |
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AP and Other Liabilities Other Procedures |
None |
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S1-a |
Compare and document (including expectations) balances in the liability accounts and related interest expense with those of prior periods or other expectations. |
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Audit Program for Income Taxes |
None |
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Audit Program for Equity |
None |
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Equity Other Procedures |
None |
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S2-a(1) |
a. Perform and document (including expectations) one or more of the following analytical procedures on expense (including payroll) accounts: |
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(1) Compare balances in expense accounts with those of prior periods or other expectations. |
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S2-a(2) |
Compare balances in expense accounts by month and with corresponding monthly balances for the prior years. |
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a. Perform and document (including expectations) one or more of the following analytical procedures on other income accounts: |
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S2-b(2) |
(1) Compare balances in other income accounts with those of prior periods or other expectations. |
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S2-b(1) |
(2) Compare balances in other income accounts by month and with corresponding monthly balances from prior years. |
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S3 |
1. Scan the accounting records for large and unusual transactions and review evidence obtained in other audit areas that relate to income and expense accounts. Cross-reference work done in balance-sheet areas to the related revenue and expense accounts. Obtain an understanding of the business purpose (or lack thereof) for significant or unusual transactions. For significant unusual transactions identified, perform additional procedures in the Related-party Transactions and Significant Unusual Transactions section of . |
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Add'l Proc 6a |
Review the vendor list for any unusual patterns, such as names that may be similar but not identical to names of approved vendors and vendors that have multiple addresses. Review vendor files for unusual items, such as vendor invoices that appear different from the norm, consecutive vendor invoice numbers, preprinted and not customized forms, different delivery addresses, different telephone numbers, and other unusual patterns. |
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Income Statement Other Procedures |
None |
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General Planning Procedures
Section #1 - Audit Step: (S-2) Read any current year interim financial statements
Audit Program: General Planning Procedures
Audit Step: (S-2) Read any current year interim financial statements
Steps to complete using Validis:
- Make sure that your client’s data has been uploaded and is current with interim data.
- Click on your client’s portal
- Within the portal, select “Income Statement (detailed)” within the General Ledger section on the left side panel.
- The two prior fiscal year income statements will be automatically be displayed. To add the current year interim financial statement, select “Year to date” from the drop-down menu and then select the appropriate interim date you wish to review. For example, if you are performing your interim work as of September 30, 2019 then choose “YTD ended 30/09/2019”. If you would like to see the comparative interim statement for the prior year (in our example, September 30, 2018), then select “Previous 1”. Hit “Apply” to create the interim selections.
- If you would like to ONLY see the interim data (and not the prior year financials), click on the “X” in the top left corner of each year to delete the column.
- To expand the income statement and see all accounts within each category, click on the “Expand All” button.
- To download the interim statements into Excel, click on the “Download (XLSX)” button.
- You can also create a column to see the variances between the interim income statements. Click on “Variances” and choose the periods you would like to compare. This will give you a dollar and percentage change between the two periods.
- You can also obtain the interim financials for the Balance Sheet, by clicking on “Balance Sheet (detailed)” in the General Ledger section. Repeat step 4 to create an interim Balance Sheet.
Section #2 Audit Step: S-8e - Apply and document preliminary analytical procedures
Audit Program: General Planning Procedures
Audit Step: S-8e - Apply and document preliminary analytical procedures by (1) comparing account balances for the current period to similar amounts in the prior-period annual or interim financial statements or other expectations
Steps to complete using Validis:
- Make sure that your client’s data has been uploaded and is current with interim data.
- Click on your client’s portal
- Within the portal, select “Income Statement (detailed)” within the General Ledger section on the left side panel.
- The two prior fiscal year income statements will be automatically be displayed. To add the current year interim financial statement, select “Year to date” from the drop-down menu and then select the appropriate interim date you wish to review. For example, if you are performing your interim work as of September 30, 2019 then choose “YTD ended 30/09/2019”. If you would like to see the comparative interim statement for the prior year (in our example, September 30, 2018), then select “Previous 1”. Hit “Apply” to create the interim selections.
- To compare ONLY the current period to the prior period annual or prior period interim financial statements, click on the “x” in the top left of the column to remove any unwanted financial data.
- To expand the income statement and see all accounts within each category, click on the “Expand All” button.
- To download the interim statements and prior periods into Excel, click on the “Download (XLSX)” button.
- You can also create a column to see the variances between the interim income statements. Click on “Variances” and choose the periods you would like to compare. This will give you a dollar and percentage change between the two periods.
- You can also obtain the interim financials for the Balance Sheet, by clicking on “Balance Sheet (detailed)” in the General Ledger section. Repeat step 4 to create an interim Balance Sheet.
Section #3 - Audit Step: S-2a - Scan cash receipts and disbursements for significant or unusual transactions
Audit Program: Cash
Audit Step: S-2a - Scan cash receipts and disbursements for significant or unusual transactions (including any bank transfers) near year end (both before and after year end).
Steps to complete using Validis:
- Click on “Bank Accounts” within the General Ledger section of the left hand panel.
- Click on the date selection and change the date range to the last month of the fiscal year to the first month of the subsequent year. In our example, we want to view all cash activity for December 1, 2019 to January 31, 2020. This will give you all cash receipts and disbursements near year end.
- Click on the bank account you would like to review. In our example, we will review “Bank of America”
- The data will now show all activity for the two months selected. You can download this data into Excel for further review by clicking on the “Download (XLSX)” button. You can also filter the data within the portal for a scan of significant or unusual transactions. To do this you can sort the data by date (to examine activity in the last days and first days of the periods), you can sort by amount to look for large or unusual items, and you can also sort by type to see if there were unusual types of transactions being recorded into cash.
- Validis can also create a list of all bank transfers that occurred during a period for review. A list of all bank transfers is located within the Cash Workpapers. To create, select “Generate Working Papers” under Reporting Packs in the left-hand column.
- In order to see bank transfers for both the fiscal year end and first month in the subsequent month, you will need to create two sets of workpapers. In our example we will create workpapers for December 31, 2019 and January 31, 2020. First, from the drop down menu select your year end audit period. Then click on “Generate” to create a zip file with your working papers. (See image of date selection on next page)
- Once the zipfile is created, select the excel file titled “Cash Report”
- Select the second tab in the excel file for a list of all bank transfers for the year. You can identify bank transfers that occurred in the last month of the year by filtering for FP-12 in in the “Financial Period” column
- To obtain bank transfers that occurred in the first month of the subsequent year, repeat steps 6-8 with your new date. In our example, we would create workpapers “Period FP-1 ended 31 Jan 2020”. When viewing the “Schedule of Bank Transfers” tab, you will now see only transactions that occurred for FP-1.
Section #4 - Audit Step: (S-1a) Compare the balance in trade accounts receivable with the balance for prior periods or other expectation.
Audit Program: A/R and Revenue
Audit Step: (S-1a) Compare the balance in trade accounts receivable with the balance for prior periods or other expectation.
Steps to complete using Validis:
- To see a high-level comparison of the trade accounts receivables, click on the “Balance Sheet Detailed” under the General Ledger section of the panel on the left side of the portal.
- This will give you two full years of the Balance Sheet. Then click on “Expand All” or the “Current Assets” toggle to get a detailed view of the trade accounts receivable accounts. You can add additional years or click on “Variances” to get a year over year change in the account.
- For a more detailed comparison of the trade accounts receivables, you can review the AR report in the workpapers. To create and view this workpaper, click on “Generate Working Papers” under the Reporting Pack section on the left-hand panel. Once selected, choose the date of your audit/review from the drop down box and click “Generate” to create the working papers.
- Once the zip file is created, choose the “AR Report” from the list of Excel files. Once opened, the first tab called “AR Aging Comparison” will have a schedule of the aging Trade Accounts Receivable for the last 3 years.
Section #5 - Audit Step: (S-1b & S-1c) Compute the ratio of accounts receivable balance to net credit revenue for the current period and compare with the ratio for prior periods or other expectation
Audit Program: A/R and Revenue
Audit Step: (S-1b) Compute the ratio of accounts receivable balance to net credit revenue for the current period and compare with the ratio for prior periods or other expectation
AND
Audit Step: (S-1c) Compute the number of days revenue in accounts receivable (net accounts receivable divided by average revenue per day) and compare to the ratio for prior periods or other expectation.
Steps to complete using Validis:
- Click on “Generate Workpapers” under Reporting packs on the left side panel of the portal.
- From the drop-down date box, choose the period you would like to review. For example, if you are doing a year end audit for December 31, 2019, you would select “Period FP-12 ended 31 DEC 2019”. Then click on the “Generate” button next to the drop-down menu to create the workpapers. A zip file will be created with all workpapers available within Validis. Open the zip file and click on the excel file titled “AR_Report”
- Within the excel file, the first tab “AR Aging Comparison” will contain all AR ratios that have been calculated by Validis. Included in these ratios, is the ratio of AR to Net Credit Sales and the Number of Days Revenue in AR. Both ratios will show the current year and the prior year calculations. As well as a year over year variance of the two ratio’s.
Section #6 - Audit Step: S-3 - Scan the aged accounts receivable trial balance for unusual items or items that might require reclassification in the balance sheet.
Audit Program: A/R and Revenue
Audit Step: S-3 - Scan the aged accounts receivable trial balance for unusual items or items that might require reclassification in the balance sheet.
Steps to complete using Validis:
- Click on “Generate Workpapers” under Reporting packs on the left side panel of the portal.
- From the drop-down date box, choose the period you would like to review. For example, if you are doing a year end audit for December 31, 2019, you would select “Period FP-12 ended 31 DEC 2019”. Then click on the “Generate” button next to the drop-down menu to create the workpapers. A zip file will be created with all workpapers available within Validis. Open the zip file and click on the excel file titled “AR_Report”
- Within the excel file, click on the tab called “Aged Receivables”. This is a list of all customers showing how their outstanding balance is broken down into 30-day aging categories. This is high level view of the aged trial balance.
- For a more detailed view of the AR Trial Balance, click on the “Detailed Aged Receivables” tab. This will give the same list of vendors with their balances broken into aging categories, except now you are able to see specific invoice balances and other activity per customer.
Section #7 - Audit Step: S-5b(2) - The allowance as a percentage of accounts receivable.
Audit Program: A/R and Revenue
Audit Step: S-5b(2) - The allowance as a percentage of accounts receivable.
Steps to complete using Validis:
- Click on “Generate Workpapers” under Reporting packs on the left side panel of the portal.
- From the drop-down date box, choose the period you would like to review. For example, if you are doing a year end audit for December 31, 2019, you would select “Period FP-12 ended 31 DEC 2019”. Then click on the “Generate” button next to the drop-down menu to create the workpapers. A zip file will be created with all workpapers available within Validis. Open the zip file and click on the excel file titled “AR_Report”
- Within the excel file, click on the tab called “Initial Audit Sales Activity”. Within this tab you will find several analytics around sales and AR, including the allowance for doubtful accounts as a percentage of AR. There are three years of calculations and a year over year comparison.
Section #8 - Audit Step: S-5(4) - Each aging category (under 30 days, 30–60 days, etc.) as a percentage of total receivables.
Audit Program: A/R and Revenue
Audit Step: S-5(4) - Each aging category (under 30 days, 30–60 days, etc.) as a percentage of total receivables.
Steps to complete using Validis:
- Click on “Generate Workpapers” under Reporting packs on the left side panel of the portal.
- From the drop-down date box, choose the period you would like to review. For example, if you are doing a year end audit for December 31, 2019, you would select “Period FP-12 ended 31 DEC 2019”. Then click on the “Generate” button next to the drop-down menu to create the workpapers. A zip file will be created with all workpapers available within Validis. Open the zip file and click on the excel file titled “AR_Report”
- Within the excel file, the first tab “AR Aging Comparison” will contain an aging breakdown of AR and the calculation of each bucket as a percentage of total AR. In addition to the current year, the calculation is done for 2 additional prior years.
Section #9 - Audit Step: S-8a Obtain a schedule for the workpapers summarizing revenue by major product line and geographic location (or other meaningful categories) for the year and by meaningful interim period (e.g., monthly or quarterly). Agree or reconcile the total to the general ledger.
Audit Program: A/R and Revenue
Audit Step: S-8a Obtain a schedule for the workpapers summarizing revenue by major product line and geographic location (or other meaningful categories) for the year and by meaningful interim period (e.g., monthly or quarterly). Agree or reconcile the total to the general ledger.
Steps to complete using Validis:
- Click on “Journal Entries” under the General Ledger section of the portal on the left-hand side. Select the date you would like to see the data and then click on “Download (XLSX)” to create an excel file with all the journal entries.
- If your client uses an ERP system that allows them to record revenue by class (example – major product line or location) then you will see the class identification on the last column of the spreadsheet.
- If you have data available in the class field, you can now filter by Revenue accounts. Start by right clickng anywhere within the Excel file and choosing “Quick Filter”. Then filter by account number or account name in column D and E, respectively. Choose the Revenue accounts that you would like to summarize. Once the Revenue accounts have been identified you can apply an additional filter on the class column to identify and summarize revenue by category.
Section #10 - Audit Step: S-9 - Scan the listing of revenue transactions during the period and investigate large or unusual transactions near period end (both before and after).
Audit Program: A/R and Revenue
Audit Step: S-9 - Scan the listing of revenue transactions during the period and investigate large or unusual transactions near period end (both before and after).
Audit Steps using Validis:
- To review all revenue transactions during the period, click on “Generate Workpapers” under Reporting packs on the left side panel of the portal.
- From the drop-down date box, choose the period you would like to review. For example, if you are doing a year end audit for December 31, 2019, you would select “Period FP-12 ended 31 DEC 2019”. Then click on the “Generate” button next to the drop-down menu to create the workpapers. A zip file will be created with all workpapers available within Validis. Open the zip file and click on the excel file titled “AR_Report”
- Within the excel file, scroll through the tabs until you reach the tab named “Sales Invoices”. This will be a listing of all revenue for the year and can be easily filtered to see large or unusual (negative items).
- To view specific revenue transactions for near period end (before and after), click on “Income Statement (Detailed)” under the General Ledger Section of the portal on the left side. In this example, we are assuming a year end audit of December 31, 2019 and want to review revenue for the months of December 2019 and January 2020. To do this, first select “Period” for the type of Income Statement you want to create. Next, select “Period ended 31/01/2020” to give you the January 2020 revenue. Then select “Previous 1” to also give you December 2019 revenue. Lastly, click on “Apply” to create the income Statements.
- Once the Income Statements have been created, click on the total revenue balance in one of the months.
- The next screen will show you all accounts that make up the total revenue balance. Click on the Total balance in order to see a detail of these accounts.
- Once you have the detail of all revenue accounts for the month, you can filter the transactions for large or unusual items within the portal by toggling the “Amount” column. Or you can download into Excel to filter for transactions.
- To review the revenue transactions for December, repeat steps 5-7
Section #11 - Audit Step: (Add'l Procedrues - 6a) - Compute the ratio of accounts receivable to current assets, total assets, and/or net worth and compare to the ratios for prior periods or other expectations
Audit Program: A/R and Revenue
Audit Step: (Add'l Procedrues - 6a) - Compute the ratio of accounts receivable to current assets, total assets, and/or net worth and compare to the ratios for prior periods or other expectations
Steps to complete using Validis:
- Click on “Generate Workpapers” under Reporting packs on the left side panel of the portal.
- From the drop-down date box, choose the period you would like to review. For example, if you are doing a year end audit for December 31, 2019, you would select “Period FP-12 ended 31 DEC 2019”. Then click on the “Generate” button next to the drop-down menu to create the workpapers. A zip file will be created with all workpapers available within Validis. Open the zip file and click on the excel file titled “AR_Report”
- Within the excel file, the first tab “AR Aging Comparison” will contain all AR ratios that have been calculated by Validis. Included in these ratios, is the ratio of accounts receivable to current assets and total assets.
Section #12 - Audit Step: (Add'l Procedrues – 7b) - Review the aged trial balance with subsequent collections, credit memos, and write-offs posted
Audit Program: A/R and Revenue
Audit Step: (Add'l Procedrues – 7b) - Review the aged trial balance with subsequent collections, credit memos, and write-offs posted
Steps to complete using Validis:
- Click on the “Receivable Ledger Control” report under Receivables Ledger on the left-hand side of the portal. Then click on the date box to change the date to after year end.
- To change the date box to the appropriate time frame, select the subsequent year and month you would like to review. In this example, we will look at 2020 and have the following months to review for subsequent collections, credit memos and write-offs.
- After the appropriate dates have been selected, the report will change to show the new dates. Select on the appropriate month (in our example, we will choose January). After you select the month, the report will show activity for AR just for that month. Within this report you can select specific boxes to see specific transactions. Click on “Cash” to see subsequent cash collections, “Credit Notes” to see credit memos and “Write-offs” for accounts written off subsequent to year end.
Section #13 - Audit Step: S-9A (Test of Rev Details) - Obtain a listing of the contracts with customers for which revenue was recognized during the period (such as a sales journal). Agree or reconcile the total to the general ledger.
Audit Program: A/R and Revenue
Audit Step: S-9A (Test of Rev Details) - Obtain a listing of the contracts with customers for which revenue was recognized during the period (such as a sales journal). Agree or reconcile the total to the general ledger.
Audit Steps using Validis:
- To review all revenue transactions during the period, click on “Generate Workpapers” under Reporting packs on the left side panel of the portal.
- From the drop-down date box, choose the period you would like to review. For example, if you are doing a year end audit for December 31, 2019, you would select “Period FP-12 ended 31 DEC 2019”. Then click on the “Generate” button next to the drop-down menu to create the workpapers. A zip file will be created with all workpapers available within Validis. Open the zip file and click on the excel file titled “AR_Report”
- Within the excel file, scroll through the tabs until you reach the tab named “Sales Invoices”. This will be a listing of all revenue for the year by customer. The total is given at the bottom of the report and can be agreed the general ledger obtained from your client or within the Validis portal.
Section #14 - Audit Step: S-21b(2) (Test of Revenue Cutoff) - Perform and document the following analytical procedures as a test of revenue cutoff: (1) Compare revenue for the last month of the year to revenue for the rest of the year and the first month after year-end.
Audit Program: A/R and Revenue
Audit Step: S-21b(2) (Test of Revenue Cutoff) - Perform and document the following analytical procedures as a test of revenue cutoff: (1) Compare revenue for the last month of the year to revenue for the rest of the year and the first month after year-end.
Audit Steps using Validis:
- Click on “Income Statement (detailed)” under the General Ledger section on the left-hand side of the portal. The Income Statement (detailed) will automatically give you two full years of the financial statement. For this audit step we do not need the prior year. Click on the “x” in the top left hand corner to remove that year.
- Now you can format the Income Statement to match the audit step. First, we will add the last month of the current year for this analysis. To do this, choose “Period” for monthly income statement and “Period ended 31/12/2019” (Note: In this example we are performing the year audit as of 12/31/2019). Then click “Apply” to create the last month Income Statement.
- Repeat step 2 to create an income statement for the first month of the subsequent year. In this example, we would choose “Period ended 31/01/2020”.
- After you have created the appropriate income statements, click on “Expand All” to see all revenue accounts. You can either download the document into Excel to perform analytics or you can click on “Variances” to see the dollar and percentage change during the periods.
Section #15 - Audit Step: S-21b(1) (Test of Revenue Cutoff) - Compare monthly returns, credits, and other elements of variable consideration for the last few months of the fiscal year to the first few months following year-end.
Audit Program: A/R and Revenue
Audit Step: S-21b(1) (Test of Revenue Cutoff) - Compare monthly returns, credits, and other elements of variable consideration for the last few months of the fiscal year to the first few months following year-end.
Steps to complete using Validis:
- Click on the “Receivable Ledger Control” report under Receivables Ledger on the left-hand side of the portal. Then click on the date box to change the date to after year end.
- For this audit step, we need to look at several months prior to year end and several months after year end. We are going to assume we are doing at 2019-year end audit in our example. To do this click on the date box and choose a date range that covers the time frame needed.
- Once selected, you will be able to review credits for the selected time frame.
Section #16 - Audit Step: S-21b(1) (Test of Revenue Cutoff) - Ensure the mathematical accuracy of trial balances
Audit Program: Audit Program for General Auditing and Completion
Audit Step: S-21b(1) (Test of Revenue Cutoff) - Ensure the mathematical accuracy of trial balances
Steps to complete using Validis:
- Click on “Trial Balance” under the General Ledger section of the portal on the left-hand side. The sum of the debit and credit columns will be given on every page of the trial balance. To recalculate and verify the accuracy, click on “Download (XLSX)” to create the trial balance in Excel. Use the sum feature to total the debit and credit columns.
Section #17 - Audit Step: S-2a- Obtain all general ledger entries and test for completeness.
Audit Program: Audit Program for General Auditing and Completion
Audit Step: S-2a- Obtain all general ledger entries and test for completeness.
Steps to complete using Validis:
- To perform this audit step, we are going to create a rollforward of the trial balance. To begin, click on “Trial Balance” from the left-hand side of the portal under “General Ledger”. The trial balance shown will be for the current audit year, therefore you can leave the date alone and click on “Download (XLSX)” to create the trial balance in Excel. After you have downloaded the current year, change the date of the trial balance to last audit year, then click on “Download (XLSX)” again. You will now have two excel files with the current audit year and prior audit year trial balance.
- Next, download the full general ledger by clicking on “Journal Entries” within the “General Ledger” section of the portal on the left-hand side. Ensure that the date range for the journal entries is the complete current audit year, then click on “Download (XLSX)” to create a full general ledger entry list in excel.
- Within the journal entry excel file, delete the header and title information of the file so that you can easily create a pivot table. This will include any images and headers. This example would include deleting the image “Validis” and deleting the first 7 rows of the table.
- Once the excel sheet is formatted, click on “Insert” and find the option “Recommended Pivot Tables”. Choose the pivot table that sums up the account balances by A/C code. If your client does not use account numbers or if account numbers are missing, you can choose A/C name. However, you want to try and use A/C code as this will be the same formatting as the Trial Balance.
- Now, create the trial balance rollforward by manually combining the three spreadsheets. First, take the trial balance from the prior year (deleting unnecessary columns “COA Categories” and “COA-Sub Categories”) and copy the balances that were calculated in the pivot table. Next copy the balances from the current year trial balance. Lastly, check the mathematical accuracy of the rollforward.
Section #18 - Audit Step: S-2a - Compare balances of inventory with those of prior periods or other expectations.
Audit Program: Audit Program for Inventory and COS
Audit Step: S-2a - Compare balances of inventory with those of prior periods or other expectations.
Steps using Validis:
- Click on “Balance Sheet (detailed)” under the General Ledger section of the portal on the left-hand side. Click on “Expand All” to find the Inventory accounts under Current Assets. Click on “Variances” to see the dollar and percentage change of inventory. NOTE: Two years of inventory data will automatically be given. If you would like to compare additional periods, select the periods from the drop-down box above the balance sheet.
Section #19 - Audit Step: (S-2c) - Compute inventory turnover and compare with the turnover of prior periods or other expectations.
Audit Program: Audit Program for Inventory and COS
Audit Step: (S-2c) - Compute inventory turnover and compare with the turnover of prior periods or other expectations.
Steps to complete using Validis:
- Click on “Generate Workpapers” under Reporting packs on the left side panel of the portal.
- From the drop-down date box, choose the period you would like to review. For example, if you are doing a year end audit for December 31, 2019, you would select “Period FP-12 ended 31 DEC 2019”. Then click on the “Generate” button next to the drop-down menu to create the workpapers. A zip file will be created with all workpapers available within Validis. Open the zip file and click on the excel file titled “Inventory-Report”
- Within the first tab, “Inventory Comparison Analysis”, the inventory turnover ratio has been calculated for the current and prior year.
Section #20 - Audit Step: (S-3b(1)) - Compare and document (including expectations) cost of sales for the last month of the year to cost of sales for the first month after year end.
Audit Program: Audit Program for Inventory and COS
Audit Step: (S-3b(1)) - Compare and document (including expectations) cost of sales for the last month of the year to cost of sales for the first month after year end.
Steps to complete using Validis:
- Within the portal, select “Income Statement (detailed)” within the General Ledger section on the left side panel.
- The two prior fiscal year income statements will be automatically be displayed. To add months, select “Period” in first drop-down box. In the second drop down box, select the appropriate month. In our example, we will choose “Period ended 31/12/2019” to see the last month of the year. You can repeat this to add “Period ended 31/01/2020” to see the first month after year end.
- Click the “Expand All” button to see specific accounts, including Cost of Sales (or Cost of Revenue). You can click on the “Variance” button to see the dollar and percentage change between the last month of the current year and the first month of the subsequent year.
Section #21 - Audit Step: Add'l Proc 1c - In conjunction with the cash audit program, identify the last check number(s) written for later testing of held checks.
Audit Program: Audit Program for Inventory Observation
Audit Step: Add'l Proc 1c - In conjunction with the cash audit program, identify the last check number(s) written for later testing of held checks.
Steps to complete using Validis:
- Click on “Bank Accounts” under the General Ledger section of the portal on the left-hand side. Click on the date field box, to change the date range to the last month in the fiscal period. In our example we have changed it to the month of December 2019. Click on the cash account you would like to review. In our example, we will review Bank of America.
- Click on the toggle arrow next to “Type” to find a listing of checks written for the month. (NOTE: Checks are identified as “Bill Pmt – Cheque” in the portal). In the reference column, you will find the check numbers.
Section #22 - Audit Step: 2a - Compare and document (including expectations) gross profit for the last month of the period under audit to gross profit for the first month of the subsequent period to assess reasonableness of cutoff.
Audit Program: Inventory Observation - Other Procedures
Audit Step: 2a - Compare and document (including expectations) gross profit for the last month of the period under audit to gross profit for the first month of the subsequent period to assess reasonableness of cutoff.
Steps to complete using Validis:
- Within the portal, select “Income Statement (detailed)” within the General Ledger section on the left side panel.
- The two prior fiscal year income statements will be automatically be displayed. To add months, select “Period” in first drop-down box. In the second drop down box, select the appropriate month. In our example, we will choose “Period ended 31/12/2019” to see the last month of the year. You can repeat this to add “Period ended 31/01/2020” to see the first month after year end.
- You now have Gross Profit for the last month of the audit year and the first month of the subsequent year. You can click on the “Variance” button to see the dollar and percentage change.
Section #23 - Audit Step: (S1-a) - Obtain a schedule that summarizes the opening and ending balances in each property and related accumulated depreciation and amortization account and the transactions in each account (additions and retirements, depreciation and amortization expense, transfers or other adjustments, etc.) and that describes the depreciation and amortization methods and lives.
Audit Program: Audit Program for Property
Audit Step: (S1-a) - Obtain a schedule that summarizes the opening and ending balances in each property and related accumulated depreciation and amortization account and the transactions in each account (additions and retirements, depreciation and amortization expense, transfers or other adjustments, etc.) and that describes the depreciation and amortization methods and lives.
Steps to complete using Validis:
- Click on “Generate Workpapers” under Reporting packs on the left side panel of the portal.
- From the drop-down date box, choose the period you would like to review. For example, if you are doing a year end audit for December 31, 2019, you would select “Period FP-12 ended 31 DEC 2019”. Then click on the “Generate” button next to the drop-down menu to create the workpapers. A zip file will be created with all workpapers available within Validis. Open the zip file and click on the excel file titled “Property-Report”
- The first tab in the Excel sheet, “Fixed Asset Summary and Analysis” will summarize the opening and ending balance of each property, depreciation and intangible account.
- For a specific view on additions and disposals, click on the 2nd tab “Fixed Asset Movements”. Here you will find details surrounding all journal entries related to the fixed asset transactions.
Section #24 - Audit Step: Add'l Proc 6a - Compute the ratio of depreciation and amortization expense to the related property and compare to the ratio for prior periods or other (documented) expectation. Investigate any unexpected results (that is, ratios that differ from what would be expected) considering known changes in client operations.
Audit Program: Audit Program for Property
Audit Step: Add'l Proc 6a - Compute the ratio of depreciation and amortization expense to the related property and compare to the ratio for prior periods or other (documented) expectation. Investigate any unexpected results (that is, ratios that differ from what would be expected) considering known changes in client operations.
Steps to complete using Validis:
- Click on “Generate Workpapers” under Reporting packs on the left side panel of the portal.
- From the drop-down date box, choose the period you would like to review. For example, if you are doing a year end audit for December 31, 2019, you would select “Period FP-12 ended 31 DEC 2019”. Then click on the “Generate” button next to the drop-down menu to create the workpapers. A zip file will be created with all workpapers available within Validis. Open the zip file and click on the excel file titled “Property-Report”
- The first tab in the Excel sheet, “Fixed Asset Summary and Analysis” will calculate the ratio of depreciation and amortization for the current and prior year. Along with a variance between the two years.
Section #25 - Audit Step: Extended Procedures 2 - Scan the activity in the account and investigate any unusual entries or absence of entries that would be expected (such as amortization entries)
Audit Program: Audit Program for Other Assets
Audit Step: Extended Procedures 2 - Scan the activity in the account and investigate any unusual entries or absence of entries that would be expected (such as amortization entries)
Steps to complete using Validis:
- To scan the activity in any account, click on the “Trial Balance” under the General Ledger section of the portal on the left-hand side. Within the search box, input the account name or number that you would like to view.
- Once you have found your account, click on that account to see a detail of all entries. The entries can be downloaded to Excel by clicking on the “Download (XLSX)” button. Or the entries can be sorted (for example to see large or negative entries) by clicking on the arrow toggle in the “Amount” column.
Section #26 - Audit Step: S2-b - Scan the listing of accounts payable and investigate any unusual or old items.
Audit Program: Audit Program for AP and Other Audit Liabilities
Audit Step: S2-b - Scan the listing of accounts payable and investigate any unusual or old items.
Steps to complete using Validis:
- Click on “Generate Workpapers” under Reporting packs on the left side panel of the portal.
- From the drop-down date box, choose the period you would like to review. For example, if you are doing a year end audit for December 31, 2019, you would select “Period FP-12 ended 31 DEC 2019”. Then click on the “Generate” button next to the drop-down menu to create the workpapers. A zip file will be created with all workpapers available within Validis. Open the zip file and click on the excel file titled “AP-Report”
- Within the excel file, scroll through the tabs to find “Payables Open Items List”. This will be a list of all outstanding payables as of the date you selected in step #2. Included is the invoice date and amount. Scan both columns to find unusual or old accounts payable items.
Section #27 - Audit Step: (S4-a) - Perform a search for unrecorded liabilities by performing the following procedures: Obtain and examine supporting detail for selected disbursements after the balance-sheet date and determine whether the goods or services on the paid invoices were received on or before the balance-sheet date. If so, determine whether the liability is recorded. Document the source and selection criteria for items tested. (If the entity uses a voucher register, consider performing these procedures on material transactions vouchered after the balance-sheet date.)
Audit Program: Audit Program for AP and Other Audit Liabilities
Audit Step: (S4-a) - Perform a search for unrecorded liabilities by performing the following procedures: Obtain and examine supporting detail for selected disbursements after the balance-sheet date and determine whether the goods or services on the paid invoices were received on or before the balance-sheet date. If so, determine whether the liability is recorded. Document the source and selection criteria for items tested. (If the entity uses a voucher register, consider performing these procedures on material transactions vouchered after the balance-sheet date.)
Steps to complete using Validis:
- Click on “Payables Ledger Control” under the Payables Ledger section on the left-hand side of the portal. Click on the date box to change the date of the report to include the first month after year end. In this example, we choose the date range January 1, 2019 to January 1, 2020. Once the report is created, click on the row containing the month after year end. Again, we will choose January 2020.
- By clicking on the specific month, you can see all transactions that relate to AP for the that time period. To see all disbursements made during the month, click on “Cash” at the top of the report. This will give you a list of all disbursements after the balance sheet date. From here you can choose a sample to test if the liability was recorded properly.
Section #28 - Audit Step: (S7-a) Test accruals and other liabilities by performing the following procedures:
Audit Program: Audit Program for AP and Other Audit Liabilities
Audit Step: (S7-a) Test accruals and other liabilities by performing the following procedures:
Scan the working trial balance and determine those accrual or other liability accounts for which additional testing should be performed.
Steps to complete using Validis:
- Click on “Trial Balance” under the General Ledger section of the portal on the left-hand side. To find the accrual or other liability accounts, you can use the search function to find specific account names or numbers. Or you can scroll through the trial balance by clicking on the page arrows. (NOTE: To see more than 10 lines at a time, you can expand the view in the bottom left corner).
Section #29 - Audit Step: (Extended Procedures 1) - Test the clerical accuracy of the accounts payable listing.
Audit Program: Audit Program for AP and Other Audit Liabilities
Audit Step: (Extended Procedures 1) - Test the clerical accuracy of the accounts payable listing.
Steps to complete using Validis:
- Click on “Generate Workpapers” under Reporting packs on the left side panel of the portal.
- From the drop-down date box, choose the period you would like to review. For example, if you are doing a year end audit for December 31, 2019, you would select “Period FP-12 ended 31 DEC 2019”. Then click on the “Generate” button next to the drop-down menu to create the workpapers. A zip file will be created with all workpapers available within Validis. Open the zip file and click on the excel file titled “AP-Report”
- Within the excel file, scroll through the tabs to find “Payables Open Items List”. This will be a list of all outstanding payables as of the date you selected in step #2. To test the clerical accuracy, use excel to sum all outstanding A/P. A total has been calculated for comparison at the bottom of the Outstanding column.
Section #30 - Audit Step: (Extended Procedures 2-b) - Scan the listing for large debit balances
Audit Program: Audit Program for AP and Other Audit Liabilities
Audit Step: (Extended Procedures 2-b) - Scan the listing for large debit balances
Steps to complete using Validis:
- Click on “Generate Workpapers” under Reporting packs on the left side panel of the portal.
- From the drop-down date box, choose the period you would like to review. For example, if you are doing a year end audit for December 31, 2019, you would select “Period FP-12 ended 31 DEC 2019”. Then click on the “Generate” button next to the drop-down menu to create the workpapers. A zip file will be created with all workpapers available within Validis. Open the zip file and click on the excel file titled “AP-Report”
- Within the excel file, scroll through the tabs to find “Payables Open Items List”. This will be a list of all outstanding payables as of the date you selected in step #2. All debit balances will appear at the bottom of the outstanding list, scroll down to scan for large debit balances.
Section #31 - Audit Step: (S1-a) - Compare and document (including expectations) balances in the liability accounts and related interest expense with those of prior periods or other expectations.
Audit Program: Audit Program for NP and LT Debt
Audit Step: (S1-a) - Compare and document (including expectations) balances in the liability accounts and related interest expense with those of prior periods or other expectations.
Steps to complete using Validis:
- Click on “Generate Workpapers” under Reporting packs on the left side panel of the portal.
- From the drop-down date box, choose the period you would like to review. For example, if you are doing a year end audit for December 31, 2019, you would select “Period FP-12 ended 31 DEC 2019”. Then click on the “Generate” button next to the drop-down menu to create the workpapers. A zip file will be created with all workpapers available within Validis. Open the zip file and click on the excel file titled “LTD-Report”
- Within the LTD report you will find a rollforward of all Notes Payable and Long-Term Debt from the prior year to the current year. Also included will be a year over year comparison of bank charges and interest expense.
Section #32 - Audit Step: S2-a(1) and S2-a(2) - Perform and document (including expectations) one or more of the following analytical procedures on expense (including payroll) accounts:
Audit Program: Audit Program for Income Statement
Audit Step: S2-a(1) and S2-a(2) - Perform and document (including expectations) one or more of the following analytical procedures on expense (including payroll) accounts:
(1) Compare balances in expense accounts with those of prior periods or other expectations.
(2) Compare balances in expense accounts by month and with corresponding monthly balances for the prior years.
(3) Compare balances in other income accounts with those of prior periods or other expectations.
(4) Compare balances in other income accounts by month and with corresponding monthly balances from prior years.
Steps using Validis:
- Select “Income Statement (detailed)” within the General Ledger section on the left side panel. Expand the “Operating Expenses” and “Financial Charges and Other Income” section of the income statement to see the audit year and prior year balances. Click on “Variances” and choose “Select All” to see the dollar and percentage change of expenses year over year.
- For a monthly comparison of expenses, we can create a custom income statement view. From the drop-down boxes, select “Period” and the month you want to review. In our example we will look at January 2020.
- Repeat step #2 and select the corresponding month in the prior year. In our example, we would choose January 2019.
- Once you have the months created that you would like to compare, click on “Variances” and choose the appropriate months to create a dollar and percentage change analysis.
Section #33 - Audit Step: S3 - Scan the accounting records for large and unusual transactions and review evidence obtained in other audit areas that relate to income and expense accounts. Cross-reference work done in balance-sheet areas to the related revenue and expense accounts. Obtain an understanding of the business purpose (or lack thereof) for significant or unusual transactions. For significant unusual transactions identified, perform additional procedures in the Related-party Transactions and Significant Unusual Transactions.
Audit Program: Audit Program for Income
Audit Step: S3 - Scan the accounting records for large and unusual transactions and review evidence obtained in other audit areas that relate to income and expense accounts. Cross-reference work done in balance-sheet areas to the related revenue and expense accounts. Obtain an understanding of the business purpose (or lack thereof) for significant or unusual transactions. For significant unusual transactions identified, perform additional procedures in the Related-party Transactions and Significant Unusual Transactions.
Steps to complete using Validis:
- Download the full general ledger by clicking on “Journal Entries” within the “General Ledger” section of the portal on the left-hand side. Ensure that the date range for the journal entries is the complete current audit year, then click on “Download (XLSX)” to create a full general ledger entry list in excel.
- Within the excel file, to examine specific accounts (such as revenue and expenses), filter by the A/C code or A/C name. Then sort the transactions by the “Amount” column to find unusual or large transactions.
Section #34 - Audit Step: Add'l Proc 6a - Review the vendor list for any unusual patterns, such as names that may be similar but not identical to names of approved vendors and vendors that have multiple addresses. Review vendor files for unusual items, such as vendor invoices that appear different from the norm, consecutive vendor invoice numbers, preprinted and not customized forms, different delivery addresses, different telephone numbers, and other unusual patterns.
Audit Program: Audit Program for Income Statement
Audit Step: Add'l Proc 6a - Review the vendor list for any unusual patterns, such as names that may be similar but not identical to names of approved vendors and vendors that have multiple addresses. Review vendor files for unusual items, such as vendor invoices that appear different from the norm, consecutive vendor invoice numbers, preprinted and not customized forms, different delivery addresses, different telephone numbers, and other unusual patterns.
Steps to complete using Validis:
- Click on “Generate Workpapers” under Reporting packs on the left side panel of the portal.
- From the drop-down date box, choose the period you would like to review. For example, if you are doing a year end audit for December 31, 2019, you would select “Period FP-12 ended 31 DEC 2019”. Then click on the “Generate” button next to the drop-down menu to create the workpapers. A zip file will be created with all workpapers available within Validis. Open the zip file and click on the excel file titled “AP-Report”
- Within the excel file, scroll through the tabs to find “Detailed Aged Payables”. This detailed report will show all vendors, contact/address information and invoice numbers. Scan the report for duplicate vendors, multiple shipping addresses or unusual invoice activity.