Auditing Other Current Assets – Risk, Assertions, And Procedures


Other Current Assets are a type of assets owned by an entity that can be used to generate income and be converted into cash within one accounting period, i.e., usually in less than 12 months.

They are called “Other Current Assets” because they usually represent a very small or insignificant percentage of the total assets. They are also not the typical current assets like inventories, cash, or prepayments.

Below are some examples of Other Current Assets:

  • A non-current asset is held for sale
  • Advances paid, either to suppliers or employees
  • Short-term investments that are not related to the business operation


Before we can determine what procedures to perform on Other Current Assets, we need to first identify the risks associated with auditing Other Current Assets:

  • Risk of Material Misstatement: Usually Other Current Assets should be rather straightforward and the risk is often low. However, depending on the nature of the Other Current Assets, there might still be a certain risk in terms of adherence to the relevant account policies and the valuation of the Other Current Assets. The experience of the management or the experts involved by the management to perform the valuation could also affect the risk of auditing this account.
  • Control Risk: Control Risk includes failure to recognize as Other Current Asset, lack of safeguard on the Other Current Assets (depending on nature), no authorization or supporting documents to corroborate the recognition of such assets, etc. An example of a Control Risk is advanced being paid to without following the internal policy.
  • Detection Risk: Detection Risk is basically the risk that the auditor may not be able to detect the material misstatements in the reported amounts of Other Current Assets. Since Other Current Assets are normally of low value, there is a risk that a material misstatement might not be detected by the auditor.
See also  Audit Procedures for Going Concern: Assertions, Procedures, and Risks


For an auditor to be reasonably assured of the Other Current Assets balance, tests will be performed to cover the relevant audit assertions. The assertions applicable to Other Current Assets are as follows:

  • Completeness: All Other Current Asset transactions during the accounting period have been properly recorded in the financial statements.
  • Rights and Obligations (Ownership): The entity owns the Other Current Assets and has rights to them as of the reporting date.
  • Valuation: The gross amount and recoverability of the Other Current Assets compared to their net present values are properly evaluated.
  • Existence: Other Current assets reported on the balance sheet actually exist at the reporting date.
  • Presentation and Disclosure: The Other Current Asset balance is correctly presented on the balance sheet and adequate disclosures on accounting policy have been made in the notes to the financial statements.


Audit Procedures for testing Other Current Assets include Test of Controls and Substantive Tests. 

Test of Controls:

Because Other Current Assets are not a usual item on the balance sheet and their value is usually small, not all entities have controls specific for these assets. However, we have shared some controls that can be tested below:

  • Segregation of Duties: It is always important that segregation of duties exist. For example, there should be a few levels of authorization required before an advance can be given to an employee. This will discourage the employee from colliding with each other and inappropriately approving advances to themselves. 
  • Policy on payment of advance: When making advances to suppliers, the entity should have controls in place to ensure the suppliers’ legitimacy and that sufficient legal documents are obtained to ensure the suppliers will deliver as promised. This is especially important if the entity is dealing with a new supplier. When performing a test of controls, the auditor will need to check if the entity has performed all the steps required before an advance can be paid to ascertain that controls have taken place.
See also  Auditing Cash Sales – Risk, Assertions, And Procedures

Before doing the Test of Controls, auditors will usually first perform a walkthrough to gain an understanding of how the control is carried out.

It is only after this that auditors can decide which controls can be tested.

After that, samples will then be selected to test the controls. If no exception is noted, the controls will be deemed effective and reliable.

This can, in turn, reduce the number of substantive audit procedures required.

Substantive Audit Procedures for Other Current Assets:

Substantive Audit Procedures for Other Current Assets consist of the following components:

1) Substantive Analytical Procedures:

Substantive Analytical Procedures are procedures that take into consideration of both financial and non-financial data when assessing if the balance of the Other Current Assets is true and fair.

For example, the entity has informed the auditor that it has secured a buyer to buy one of its subsidiaries in the next 12 months and a sale and purchase agreement is currently underway.

Based on this statement, the auditor should expect to see a non-current asset as held for sale (a type of Other Current Asset) in the balance sheet.

We could also take note of the movement in the trade and other receivables balance and compared it with the past accounting periods. Any larger than usual movement should raise a red flag and prompt the auditor to further investigate.

2) Test of Details for Other Current Assets:

To test details for Other Current Assets, audit procedures are designed around assertions. Example and description of test of details are given in the table below:

See also  Auditing Other Income – Risk, Assertions, And Procedures
Audit AssertionExample of Audit Procedure
CompletenessSelecting a sample of agreements and contracts and determine whether it has been properly recognized as Other Current Assets instead of being charged out to the income statement.
Rights and ObligationsChecking the Other Current Assets recorded to the invoices or agreements.
ValuationTesting the net present value or market value of the samples selected is appropriate and in line with the entity’s accounting policies.
ExistenceVouching for a sample of Other Current Assets to the agreements or invoices.
Presentation and DisclosureReviewing the financial statements prepared by the entity and identifying if information regarding Other Current Assets has been sufficiently disclosed.
Scroll to Top