Economic Analysis: Theory and Practice

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Developing the analytical procedures to identify risks of material misstatement in cash flow disclosures

Vol. 17, Iss. 11, NOVEMBER 2018

Received: 5 September 2018

Received in revised form: 17 September 2018

Accepted: 26 September 2018

Available online: 29 November 2018


JEL Classification: М42

Pages: 2147–2165

Shvyreva O.I. Kuban State Agrarian University named after I.T. Trubilin, Krasnodar, Russian Federation

Subject The article addresses processes of obtaining sufficient appropriate audit evidence as to the presence or absence of significant risks of material misstatement of cash flow information in the financial statements that is used for developing an effective audit strategy.
Objectives The purpose of the research is to create and formalize in internal papers a set of audit procedures. The procedures should be reasonable in terms of collecting the input information and effective in terms of identifying the risks of material misstatement of information on cash flows.
Methods The study employs methods of observation, abstraction, analogy, time series analysis, forecasting, modeling, formalization.
Results A specific feature of my unique method is modeling the internal audit standards to identify risks of material misstatement by formalizing a universal complex of analytical procedures. The procedures enable to comprehensively assess trends, compliance with regulatory documents and by-laws based on minimum volume of financial information. The paper substantiates and formalizes a set, consisting of six analytical procedures for identifying and assessing the risks of material misstatement in the cash flow statement.
Conclusions The offered set of analytical procedures will enable to obtain information on significant risks of material misstatement in the cash flow statement and develop an effective audit strategy.

Keywords: audit risk, risk of material misstatement, cash flows, reliability of financial information, analytical procedure


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