The fourteen assurance procedures

What this screen is

Open Assurance. Fourteen procedures run on every visit, against the actual entries in the books. Each one has a reference, a title, an objective, and a result. Each one offers a working paper you can download as a CSV.

The page says something important about itself. These procedures report what they found and leave the conclusion to you. It does not say "the records are wrong". It says "three documents are missing a GST number". The difference between those two statements is the difference between a procedure and a conclusion, and it is the thing this chapter is really about.

The programme

Ref	Procedure	The objective, in the program's own words
A01	Ledger integrity	Every entry still carries the fingerprint it was sealed with, and each one includes the fingerprint of the entry before it
A02	Double entry	Every transaction moves money from somewhere to somewhere else: the two sides of each entry must be equal
A03	Bank reconciliation	The bank balance in the ledger agrees with the balance on the statement, and every imported line has been dealt with
A04	Debtors	Money owed to the business is real, correctly aged, and not overpaid
A05	Creditors	Money the business owes is recorded, and no bill is paid twice
A06	GST reconciliation	The GST in the return is the GST in the ledger, and the control accounts agree with what has been filed
A07	Journal entries	Entries that did not come from an invoice, a bill or the bank are where adjustments hide
A08	Duplicate payments	The same amount to the same supplier twice within a week is usually a mistake, and sometimes a fraud
A09	Cut-off	Entries dated in the future, or inside a period that has already been packed and closed, are the two ways a figure moves after the fact
A10	Documents and compliance	A tax invoice over $50 has to show the supplier's GST number, and every document should say what it is for
A11	Expenses	Round numbers, large one-off costs and costs that look personal are the usual places an expense account is wrong
A12	Sealed packages	Every pack that has been sealed still matches the ledger as it stands now
A13	Access and housekeeping	Who can sign in, when the books were last backed up, and whether anything failed quietly
A14	Reproduce the numbers	The reports are recalculated from the raw rows and compared with what the report says

Reading a result

Each procedure ends in one of three states, and the distinction is deliberate.

• No exceptions. The procedure ran and found nothing to report.
• Exceptions to look at. The procedure found something specific: four bank lines not coded, three documents missing a GST number, three figures that do not reproduce from the ledger.
• For information. Nothing is wrong; the procedure is telling you something you should know. Three manual entries exist. Nothing has been sealed yet.

The page sorts exceptions to the top, then information, then clean results, so the first thing you read is the thing that needs a decision.

Four procedures worth understanding properly

A07, journal entries. A journal is an entry that came from nowhere: not an invoice, not a bill, not the bank. Most journals are perfectly ordinary — depreciation, an accrual, a correction. But because they are not tied to a document, they are also the natural place to put a figure that has no support. An auditor's response is not suspicion, it is a question: what is the paperwork behind this one, and who posted it? The procedure lists every manual entry with who posted it and when, so the question can be asked precisely.

A08, duplicate payments. The same amount to the same supplier twice inside a week is usually a mistake and occasionally a fraud. Either way it is worth the two minutes it takes to check against the supplier's statement.

A09, cut-off. Two patterns, and both matter. An entry dated in the future has been posted into a period that has not happened. An entry dated inside a period that was already sealed and closed has changed a figure after the fact. Neither is automatically wrong; both need an explanation before anyone relies on the period.

A14, reproduce the numbers. This is the check that catches a reporting bug rather than a bookkeeping error. The reports are recalculated from the raw rows and compared with what the page says. If they disagree, the report is wrong even though the ledger is right, and the two possibilities lead to completely different work.

Why fraud gets its own thinking

Two of the fourteen procedures are aimed at fraud rather than error, and the reason is in the auditing standards. When the auditor identifies and assesses the risks of material misstatement due to fraud, there is a presumption that there are risks of fraud in revenue recognition, and the auditor has to evaluate which types of revenue, revenue transactions or assertions give rise to those risks ISA (NZ) 240.27.

The second is about who is best placed to do it. Management is in a unique position to perpetrate fraud, because of the ability to manipulate accounting records and override controls that otherwise appear to be working ISA (NZ) 240.32. That is why journal entries and unusual transactions get attention even when everything else looks well controlled.

Professional scepticism

The quality of every procedure on this page depends on one habit, and it has a name. When applying the conceptual framework in the ethics standard, an assurance practitioner is required to have an enquiring mind, exercise professional judgement, and apply the reasonable and informed third party test PES 1 R120.5.

An enquiring mind is not suspicion. It is the willingness to ask what the evidence actually supports, rather than what you expect it to show. The exception list on this page is where that habit starts: something is different from what you expected, and the next step is to find out why.