Relationship between substantive testing and risk assessment

Tia has called a team meeting to discuss how the testing over Crest Outfitter$$s web sales went and to talk about gathering substantive evidence on the remainder of the financial statements. This week the team will focus on asset and liability accounts. Based on the analysis of the financial statements, the most significant accounts based on size are cash; trade receivables; inventory; property, plant and equipment; trade payables and unearned revenue. Tia has asked the team to brainstorm and discuss what key factors will come into play when designing the substantive audit programs for each of these accounts. Which accounts hold higher levels of inherent risk? What tests could the auditors conduct to investigate whether those risks have resulted in a material misstatement? Tia asks the team members to provide her information about their availability over the coming weeks because some of the audit procedures they will need to conduct are time specific. Leigh asks, $$What do you mean by time$-$specific? Don$$t we just look at documents and paperwork? Shouldn$$t they be available any time?$$ Rory jumps in to explain. $$To test some assertions, like the existence of inventory, we typically attend stocktakes on the year$-$end date. This is because it$$s more efficient to test existence of inventory on the year$-$end date $-$ this gives us the most accurate and reliable evidence. We might not always do this because of scheduling and other factors, but testing closer to the year$-$end date is always preferable.$$ Leigh realises that thinking about when evidence must be collected is just as important as thinking about what to collect $($via which specific audit procedure$)$ and how much $($based on their sampling decisions$).$

Substantive Testing of Specific Accounts

Rory and Leigh are to report back to Tia about any specific considerations they have around substantive testing the balance sheet.

Required

Tia has asked Rory and Leigh to begin planning the testing of the cash account. Complete the following table based on your understanding of Crest Outfitters and the information contained in the table that Rory and Leigh prepared for Tia. Rory has filled in the level of control risk based on the other work he has completed.