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In this lesson

1. 0:00 Auditing statements of cash flows
2. 0:30 Tracing cash flow items to source documents
3. 1:12 Understanding accounting estimates and judgement
4. 2:00 Auditing assumptions in accounting estimates
5. 3:05 Using post-year-end events to verify estimates
6. 5:37 Fair value assessment and valuation processes
7. 7:21 Identifying and auditing discontinued operations
8. 9:18 Sale and leaseback audit evidence requirements

About this lesson

You'll discover the practical techniques for testing statements of cash flows, accounting estimates, fair values, and discontinued operations—all critical for the Audit and Assurance paper. The session uses a realistic sale and leaseback scenario to show you exactly what audit evidence to gather and how to apply professional scepticism when dealing with areas involving management judgement. The lesson covers four key topics. First, you'll see how to verify statements of cash flows by tracing figures back to audited workings, comparing opening and closing cash balances to bank statements, and checking loan transactions. Second, you'll learn to audit accounting estimates—such as doubtful debt provisions, depreciation periods, warranty provisions, and inventory valuations—by understanding management's process, identifying potential bias, comparing assumptions to prior years, and reviewing post-year-end events for confirmation. Third, you'll explore fair value auditing, including how to assess whether management's valuation process is sound, particularly when there's no active market and discounted cash flow models are used. Finally, you'll understand how to identify and audit discontinued operations under IFRS 5, ensuring they meet the definition and are properly disclosed. The practical scenario walks you through a sale and leaseback transaction under IFRS 16. You'll learn what audit evidence to obtain—the lease agreement, management discussions, board minutes, property market research, surveyor reports, asset registers, and the client's calculations of lease payment present values. The lesson emphasises the importance of recalculating key figures yourself, reviewing financial statement disclosures, and maintaining professional scepticism throughout, especially in areas where judgement plays a significant role.

Duration: 13m