Audit procedures for cash flow statements

 Auditors express an audit opinion on the set of financial statements which comprises of the statement of financial position, the statement of comprehensive income, the statement of changes in equity, the statement of cash flows and notes to the financial statements, including a summary of significant accounting policies for reporting year. Thus, the cash flow statement is also audited alongside other components of the financial statements. But unlike the statement of financial position and the statement of comprehensive income the auditors do not perform the tests of control and substantive procedures with respect to the statement of cash flows.

However, in accordance with ISAs, the auditor shall perform audit procedures to evaluate whether the overall presentation of the financial statements is in accordance with the applicable financial reporting framework. 

Briefly speaking the audit procedures on the cash flow statements my include:

·        Inspection of the correctness of amounts transferred from the statement of financial position and the statement of comprehensive income to the statement of cash flows (for example, Profit before taxation, Depreciation, Foreign exchange loss (gain), Increase in trade and other receivables).

·        Inspection of the correctness of the structure of the statement of cash flows.

·        Inspection of the correctness of presentation of cash inflows and outflows in the statement of cash flows (for example, the cash advances made to other parties for the purchase of PP&E should be presented under the heading “Investing activities”)

·        Recalculation of the amount of the net increase in cash and cash equivalents for the period.

·        Matching the amounts of the items “Cash and cash equivalents at beginning of period” and “Cash and cash equivalents at end of period” in the statement of cash flow with the similar ones in the Statement of the Financial position and it`s disclosure.

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