REALITY TESTING OF FIXED ASSETS AND INVENTORIES ACCOUNT BALANCES AND CYCLE TRANSACTION

Auditing is an official examination and verification of financial statements of a company, with an objective to give reasonable assurance to current and potential users of these statements that they can be relied upon to present a true and fair view. The auditor responsibilities are to express an opinion on the overall financial statements and to issue an audit  report. In order to do that, an auditor needs to perform a testing of individual account balances and sampled transactions and to obtain evidences that main auditing objectives are achieved: existence, completeness, rights and obligations, valuations, cut-off, presentation and disclosure. Major balance sheet items of most companies are fixed assets (tangible non-current assets) and inventories. The aim of this paper is to consider the chronology of the most important testing procedures conducted by auditors in the audit of inventories and fixed assets, research methods that operate using the analysis of individual operations and comparisons of the applied methods. Account balances in the general ledger which represents the value of certain balance sheet items are the result of effects of business transactions that were initiated, conducted and recorded. In order to form an opinion on whether the account
balances included in the financial statements are presented fairly, the auditor needs sufficient appropriate audit evidence, gathered through testing of transactions and direct testing of reported balance sheet values. The results of this research are a systematic view of the applied methods and improvement of the examination of these transactions cycles. Based on  the research conducted in the article we conclude that it is necessary to implement the relevant procedures and testing cycle of transactions that balance these important balance sheet items for assurances that the main audit objectives have been achieved.  

Test planning, its implementation and conclusions resulting from testing of fixed assets and inventories account balances and transactions are the topics of this article.

Keywords: audit tests, cycle of transactions, audit objectives, direct testing
of account balances, key control procedures

JEL Classification: M41, M42