CONTROL PROCEDURES.

The policies and procedures established by the Administration and that

they provide reasonable assurance that they will be achieved effectively and
efficiently the specific control objectives of the Entity constitute the
control procedures. One of the common situations that
the auditor faces the lack of formalization of control procedures. The
the auditor should be more interested in evaluating the effective functioning of the
control procedures that in their formalization within the company. The
control procedures can have preventive, detective, or
corrective in accordance with its design intended to prevent errors or to identify them and
correct them. The control procedures are aimed at compliance with
the Specific Control Objectives, which are:
Authorization - Segregation of functions and responsibility
Correct recording of operations (design and use of documents and records
appropriate)
Asset protection
Adequate valuation and independent verification

INTRODUCTION TO ASSET AUDIT

The main purpose of the Audit is to determine the reliability of the

accounting information expressed through the Financial Statements.
This is how almost all the auditor's effort is basically directed towards
to form a professional opinion on the Financial Statements as a whole, in order to
which examines each of the accounts of assets, liabilities, looking for it
elements of judgment regarding its reasonableness, which once evidenced
they form their opinion. On this occasion we will focus on examining the accounts
of the asset. To do this, we will present general concepts:
General concepts:

ACTIVE.
Set of goods and rights owned by a company.

According to IAS 1 (International Accounting Standards), the Asset is classified into

Current and Non-Current. This classification is determined considering its
degree of responsibility, taking one year as a basis.
Current Assets:

Cash and Banks

Accounts Receivable
Other accounts receivable
Warehouse
Prepaid Expenses

Objectives of Asset Accounts.

1. Establish the existence and ownership of the assets that are moving in the
Balance.
2. Determine if the asset valuation reflects the application of principles
Generally accepted accounting principles.
3. Determine if the internal control of the company is adequate.
4. Determine with a certain degree of certainty that the spot operations and the
balances in banks are adequate and valid
5. Determine the authenticity of the acquired rights presented in the
Balance.
6. Ensure that the figures displayed as inventories are
effectively represented by products, materials, and supplies that exist
physically.

Importance.
Starting from the objective of the Financial Statements Audit, it is expressed
opinion on the reasonableness of the presentation of the States
Financial statements according to generally accepted accounting principles, so that the
the auditor must examine the Financial Statements in order to express an opinion.
Balance Sheet.
AVAILABLE ASSET
This classification corresponds to those assets that the company possesses that
they can be converted into cash immediately, that is, they have a high degree of liquidity.
It therefore includes the cash from any other item that can be converted.
immediately in cash, without disrupting daily operations. Examples it
they constitute the cash holdings; the deposits in bank accounts,
sight deposit certificates and negotiable securities, among others.

CASH AND BANKS. Immediate liquidity asset that represents the stocks in
cash and bank accounts that have canceling power and are used
in the usual course of the operations carried out by the company. Cash will have the
characteristic of being available as a means of exchange and a stability of value.
The cash and bank balance is not usually significant at the end of each period.
analysis, but the accounts that comprise it involve significant movements
since it has a
Sources of income or funding (collections). At this point
The auditor must ensure that their intervention includes verifying the
different sources of income of the taxpayer (cash sales, collections to
accounts, document collections, interest collection, other income, sales of
fixed assets, loans or investments of the owners), with the purpose of
determine if any of them have been omitted in the accounting. In other words,
money income is directly related to the accounts of
income.
High and sudden increases in cash income could lead one to think
in undeclared sources of income, therefore, when certain arise
It is advisable to carry out the relevant verifications regarding its origin.
b. Fund disbursements or payments may be subject to duplication.
that is to say, payments could be duplicated, which would require verification with the
original documents, because a purchase can be accounted for by the entry of
journal using the Suppliers account and through the Cash book as if it were one
cash operation, and also individual withdrawals of the
partners or simulated payments to creditors.
In conclusion, the review of cash and the transactions related to it
they are important because it is an asset that can easily be stolen,
because most of the transactions affecting this account have a
recovery about her, for errors in others can represent mistakes in the
accounts related to cash and vice versa.
BOX AND BANKS EXAM
a. Concept of the account:
This account is also called available funds and includes cash.
in cash in drawer or deposited in banks, checks, remittances, etc., that is used by the
company as means of immediate changes.
b. Comment
Many of the errors and abnormalities that occur in companies with
Regarding money, they primarily originate from control deficiencies.
internal, both in its management and in its accounting, such as:
Lack of separation of functions between cash and accounting. Lack of policy for
bond for employees who handle cash. Income is not recorded in
immediate form, nor are they deposited intact in the bank, as soon as possible. No
It is customary as a security measure, payments with checks, if not in cash;
That is to say, fixed funds are not used for petty expenses and checks for everything.
others. Cash counts are not conducted unexpectedly, leaving
written confirmation of the same.
For this reason, the evaluation of internal control is extremely important that
the auditor practices, not only to graduate the scope of his procedures
of the audit, but also to suggest recommendations to the company, which
allow to strengthen your controls in safeguarding your financial resources.
On the other hand, it must be understood that our examination of this item is oriented
basically to obtain enough evidence that allows us to form a
reasonable opinion on cash and bank holdings presented in the Balance Sheet
General, as well as its proper management and accounting during the period that it
examine.
Likewise, we must keep in mind that the examination of cash and banks should not be
to visualize as an isolated aspect, but rather, interconnected with others
accounts such as sales, accounts receivable, expenses, etc. c. Basic Objectives
of the examination The objectives pursued by the auditor when examining cash and
Banks can be summarized as follows:
1. Determine if all received or existing funds are presented.
2. Ensure the accuracy of recorded income and expenses.
3. Ensure that the bank balance is correct.
4. Determine if the funds or deposits presented meet the conditions of
availability.
5. Verify that it is presented and classified appropriately.
AUDIT PROGRAM: CASH AND BANKS

1. CASH CONTROL
The cash is the asset that is most prone to being misused and to be
they make mistakes in their handling (for example: income that is recorded on date
posteriors in which fictitious loans are made that are later canceled) and their
registration, especially regarding cash receipts for which it is necessary
a detailed control of the cash register in such a way that it reduces the possibility of
if errors are made or funds are misused, it should facilitate the discovery
of those errors and losses as soon as they occur. The possible irregularities that are
could present would have the aim of decreasing the taxable base of the Tax on
the Income or regularize creditor balances generated by omitted income not
declared as loans to shareholders, partners, or related persons
owner (personal expense payments) or balance regularization
creditors.

PROCEDURES
A. BOX
1. Apply the internal control questionnaire to assess the degree of
reliability of it, considering that the answers must be
confirmed, varying in some cases the scope of the exam.
2. List the funds that need to be recounted, confirming their nature and name.
of the custodians with an authorized official.
3. Carry out a simultaneous audit of funds and values.
4. Determine the cash balance as follows: Balance according to books as of the date
from the last seat. More unrecorded income since the balance date according to
books, as of the date of the audit. Less unrecorded expenses since the date of the
balance according to books, as of the date of the audit. Balance at the time of the audit.
5. Count or inspect physically: Bills and coins. Checks, observing
that are in the name of the company or properly endorsed, and investigate
checks dated after the recount or out of the ordinary. Invoices,
provisional receipts or vouchers that are part of the funds, observing
that are duly approved, are of recent dates and refer to
normal disbursements, typical of the business. Regarding the unauthorized ones,
obtain approval from authorized persons.
6. Detail in your working papers: Recounted bills and coins. Checks
received, indicating: Date, bank, drawer, beneficiary, endorsement, and amount.
Invoices, receipts, vouchers, indicating: date, names, concept, amount and
approval. Checks issued by the company and not yet delivered to the
beneficiados, señalando: fecha, banco, beneficiario, e importe.
7. If as a result of the counting you find a difference (shortage or surplus),
obtain a written explanation from the custodian, treasurer or in charge. In the case,
written importation from the custodian. In the case of significant amounts,
Investigate this difference after the audit report is raised.
8. For the different arched funds, obtain a statement from the person in charge, where
it has been noted that they showed all the funds, documents, and values under their
custody and that these were counted in his presence and returned accordingly.
9. Check the amount of the fixed fund balanced with the control account of the ledger
general.
10. Verify that the last replenishment check for the petty cash issued before the
the audit has been properly accounted for.
11. Take note of the latest documents issued as of the date of the audit, such as
such as checks, invoices, receipts, deposit slips, collection reports,
etc.
12. Independently establish the amount of outstanding collections for
deposit, by the sum of: Invoices for cash sales, parts of
collectors, totals of cash register tapes and the lists of collections per
correspondence. During this task: Observe the date and numerical sequence of
the documents; Review the receipt books of the documents, verifying the
last used and the subsequent ones not yet used.
13. Ensure afterwards that the funds from collections were
deposited intact, comparing them against the cash book or banks, tickets of
deposits and then with the bank statements, investigating any checks
returned by the bank.
14. Verify that the expense receipts taken from reconciled petty cash funds,
have been included in the immediate replenishment to the stocktaking.
15. Inquire about the checks from the same company included in the funds.
arched. Check if the personal checks have a legitimate reason to exist.
(authorized exchange, etc.)
16. Regarding the exchange checks included in the audit, please verify.
subsequently that have not been returned as unpaid by the Bank.
17. If the cash count is carried out after the balance sheet date,
check the supporting documentation for the transactions made since
the date to the date of the cash count.

2. CONTROL OF BANK ACCOUNT.

Due to its nature of liquidity, certainty, and effectiveness, it also allows for a
better control of the company's money, most companies in practice
they use it for all their transactions whether by deposit of all their
daily collections or for payments to your suppliers or third parties by checks.
The control rule is that all payments must be made by means of checks, including the
payment of remuneration (this can also be made through deposits in a
savings account assigned to each worker), except for the items
small ones for which there is a fixed cash fund. This facilitates control since
that canceled checks are an effective means of verification, for which it is
It is advisable that every check must be recorded even if it has been canceled.
Generally, they require a countersignature, which makes it safer.
safeguarding of this company asset.
An important point to verify is the non-existence of bank accounts.
accounted for, which can be located through the review of the
payment receipts. It also requires a review of the issued debit notes.
by the banks in order to determine the origin of the deduction.

It is also necessary to review the bank deposit slips, because they may
appear in it recorded invoice numbers, guides, letters, checks, etc.; that do not
they are recorded in the accounting books.
Important tools include the Request for Bank Confirmation and the
Bank Reconciliation.

PROCEDURES

B. BANKS

1. Apply the internal control questionnaire to assess the degree of

reliability of the same, considering that the answers must be
confirmed, varying in some cases the scope of the exam.
2. Obtain from the company a list of the persons authorized to sign.
checks during the period under review, verifying if the changes raised
were communicated promptly to the bank.
3. Obtain the following from the company as well:
a. Bank reconciliations for the selected months as a test and of the
subsequent.
b. Bank statements.
c. File of income and expense receipts and journal entries.
4. Request direct confirmation of the balances with banks, including all the
accounts that have had movement during the fiscal year, even if they do not have
balances at the end of the year. The confirmation must also include information
additional about loans payable, interest, liens, lawsuits or
any kind of contingencies that the client may have.
5. In relation to the bank reconciliations as of the balance date, carry out the
next:
5.1 Verify your arithmetic correctness.
5.2 Check the items that appear in the reconciliation, comparing the
movement recorded during the month in the bank auxiliary book against which
show the bank statements.
5.3 Make sure that all pending items to be taken by the bank or by the
company, be included in the reconciliation.
6. Check that all reconciliation items appearing in the reconciliation
at the end of the month immediately preceding the balance date, they have been taken by
the bank or by the company, as appropriate, during the course of the following
either, that they appear in the reconciliation carried out on the date of the balance.
7. Obtain the bank account statements for the month following the date of
balance and compare against these the reconciliation accounts not taken by the
bank as of the balance date. Investigate the important items not taken by
the bank during that month, Regarding the reconciliation items not
taken by the company as of the balance date, discuss those of amounts
meaningful with the company's officials so that these practices are
register in books.
8. Check the bank transfers for the 7 days prior and
after the bank reconciliation date of the selected month, verifying
the respective order letter and its accounting record.
9. Carry out a cash check for the selected months, reconciling the
total income and expenses according to auxiliary records, with the totals of
deposits and withdrawals according to bank statements.
10. Sum the cash book or bank auxiliary for the month during which the review is conducted.
reconciliation and check the accuracy of the entries in the general ledger compare them.
balances according to books that appear in the reconciliation.

AUDIT OF EFFECTS AND ACCOUNTS RECEIVABLE

Accounts receivable represent the assets acquired by the company through
of letters, promissory notes or other documents receivable from operations
sales commercials of goods or services and also not derived from sales
of goods or services. Therefore, the company must record in a way
adequate all movements related to these documents, since
they are part of their assets, and above all, they must ensure that these do not lose their
formality to become money.
Hence the importance of controlling and auditing the 'Accounts Receivable'.
The financial auditor establishes the objectives and procedures to carry out the
examination planned in the audit of these accounts.

CONCEPT OF ACCOUNTS RECEIVABLE:

Accounts Receivable are rights legitimately acquired by the company.
that, when the time comes to execute or exercise that right, will receive in exchange
cash or any other type of goods and services.
Depending on their origin, accounts receivable can be classified into:
Coming from sales of goods or services and Not coming from sales of
goods or services.
a) Accounts Receivable:
Accounts receivable are documented receivables through
letters, promissory notes or other documents, originating exclusively from the
business operations. This account must be shown reduced from the
estimations of uncollectible debtors for this concept and for the interests not
incurred by the society.
b) Various Debtors (net):
It corresponds to all those accounts receivable that do not come from the
business operations of the company, such as current accounts of the
personal or debtors from the sale of fixed assets. The estimation of various debtors
Uncollectible debts must be reduced for presentation in the balance sheet.
c) Documents and Accounts Receivable from Related Companies:
Documents and accounts receivable from related companies, discounted the
unearned interests that originate from or are not related to commercial relationships and whose
the recovery period does not exceed one year from the date of the statements
financial.

OBJECTIVE OF ACCOUNTS RECEIVABLE AUDIT: ·

Check if the accounts receivable are genuine and if they have their origin in
sales operations.
Check if the recorded values are realistically achievable.
Check if these values correspond to transactions and if they do not exist.
returns discounts or any other element that should be considered.
Check for a permanent valuation regarding interests and adjustments.
of the amount of accounts receivable for the purposes of the balance sheet.
Verify the existence of bad debtors and their accounting calculation method.

AUDITOR'S OBJECTIVE IN THE EXAMINATION OF THE EFFECTS OF

COLLECT

The primary objectives of an accounts receivable audit are the

determination of the accuracy of the amounts to be collected, their validity and their
collectibility. In all audits of accounts receivable, it is necessary to conduct
a minimal amount of work in order to reach a conclusion about
these three objectives. The exact procedures followed to reach this
The conclusion and the way it is applied will differ among auditors and among the
audits by the same auditor.
Before proceeding to audit the accounts receivable, the auditor
must become familiar with the particular conditions under which the client works, the
organization and efficiency of its credit department, the nature of the
products sold, sales methods, credit conditions that
grant to its clientele and the internal control over accounts receivable and the
sales. The extent of the audit of accounts receivable depends on these
factors.

PRINCIPLES AND ACCOUNTING PRACTICES ON VALUATION

FROM ACCOUNTS AND RECEIVABLES AND THEIR
PRESENTATION IN THE BALANCE SHEET

ACCOUNTS RECEIVABLE
1. CONCEPT
Accounts receivable represent enforceable rights arising from sales.
Services rendered, granting of credits or any other analogous concept.
2. CLASSIFICATION. Accounts receivable group the following concepts:
Clients
Commission agents and receivable interests and dividends.
3. FOREIGN CURRENCY TRANSACTIONS. When there are accounts and
documents receivable in foreign currency must disclose this fact in a
note to the financial statements.
Accounts receivable must be settled at the exchange rate in effect at the time.
from the payment, registering loss or profit according to the exchange rate.
4. APPLICABLE ACCOUNTING PRINCIPLES. Original historical value.
Realization. Accounting period. Sufficient disclosure.
5. VALUATION RULES.
Valuation
The Effects and Accounts Receivable are valued at their nominal value, updated.
value, in the case of Short-Term Effects, for the amount of the effects
discounted and for the provision corresponding to the estimated effects
uncollectible, if their creation is authorized. The amount for increase or decrease of
The aforementioned provision for the estimated loss will affect the result of the period.
economic. In Accounts Receivable its value is updated by the provision of
valuation corresponding to the estimate of uncollectible accounts, being part of
from the result of the economic exercise, the variation of the mentioned provision. The
Accounts and Receivables in foreign currency will be valued at the exchange rate
in effect at the time of its origin and at the effective date of the closing of the fiscal year.
When this means a decrease in the originally agreed value, the loss
it will affect the result of the financial year.
6. PRESENTATION RULES. Considering their availability, the accounts for
receivables will be classified as short-term and long-term. Short-term accounts
they will be those whose maturity is less than one year from the date of
presentation of the financial statements, and the long-term ones, those of one year or
more.

Short-term accounts receivable must be presented in current assets.

immediately after cash and investments in marketable securities.
The amount due in more than one year must be presented off the balance sheet.
circulating. The credit balances of accounts receivable must be reclassified
as accounts payable, if its relative importance warrants it.
When there are accounts receivable and payable to the same individual or entity,
they should be compensated when applicable for presentation purposes in the
balance sheet, showing the resulting balance as an asset or liability according to
correspond.
Those that will be presented as Short-Term Accounts Receivable are those whose
maturities projected within twelve months from the agreement of
the operation that gave rise to them. Those who win after twelve months of
Once the transaction is initiated, they will be displayed as Effects and Accounts Receivable to
Long term, having to be reclassified at the end of the fiscal year those who
they will be due in the next exercise, moving to Effects and Accounts Receivable to
Short Term. When presented in the Assets of the Statement of Financial Position, it will be presented as
total amount, deducting the amounts of the Provisions for Effects and
Unused Uncollectible Accounts. Likewise, the Effects and Accounts Receivable
foreign currency can be analyzed in subaccounts or analysis
complementary in the Financial Statements, broken down by types of currencies.
The Advance Payments will be classified depending on their term.
maturity in the Short or Long Term.

MOST COMMON IRREGULARITIES IN ACCOUNTS RECEIVABLE

Fraud: We can affirm that it is a deception towards a third party, abuse of

trust, deceit, simulation, etc. The term 'fraud' refers to the intentional act
from the Administration, personnel or third parties, which results in a
misrepresentation of financial statements, which may imply:

Manipulation, forgery or alteration of records or documents.

Transaction log without substance or support
Poor application of accounting policies.

Types of fraud: There are considered to be two types of fraud: the first of them is
it is carried out with the clear financial intention of misappropriating company assets.
The second type of fraud is the presentation of fraudulent financial information.
as an intentional act aimed at altering the annual accounts.

Internal frauds are those organized by one or several

people within an institution, in order to obtain a personal benefit.

The frauds known as external are those that are carried out by one or
several people to obtain a benefit, using external sources such as:
banks, clients, suppliers, etc.

Why There Are Frauds: It is considered that there are frauds due to:
Lack of adequate controls.
Poorly trained and insufficient staff.
● Low / high turnover of positions. Confusing documentation
Low wages.
Existence of easily convertible assets: bonds, notes, etc.
• Deficient legislation.
Incompatible activities.

EVALUATION OF THE INTERNAL CONTROL SYSTEM:

ACCOUNTS RECEIVABLE AUDIT PROCEDURES:
Regarding Internal Control.

Credit analysis is dedicated to the collection and evaluation of information about

credit of the applicants to determine if they are up to the task of the
company credit standards.
1. Verify the existence and application of a policy for account management
to be collected.
2. Determine the effectiveness of the policy for managing accounts receivable.
3. Verify that the accounts receivable supports are in order and
in accordance with legal provisions.

4. Observe if the movements in accounts receivable are recorded.

adequately.
5. Review that there is a complete accounts receivable control system.
updated and suitable for the company's conditions.
6. Check that the modifications to accounts receivable are
correctly authorized by the relevant party.
8. Verify that accounts receivable are adequately backed.
9. Verify that the accounts receivable are valid and that the measures of
security is applied correctly (example: check guarantor)
10. Verify the existence of a functions manual for the personnel in charge of
management of accounts receivable. Just like the knowledge and compliance of
this by the clients and debtors.
11. Control the cash received from suppliers.
12. Carry out offsets of accounts payable against accounts receivable.
13. Control debit and credit notes (Discounts for purchase volumes and
others).
14. Keep cancelled checks with stop payment orders, returned and issued from
new.

Bibliography

http://www.internationalaccountingstandards.org/nic/nic.htm

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MEXICAN INSTITUTE OF PUBLIC ACCOUNTANTS. Standards and Procedures of

Audit. Mexico, IMCP 1996.