The lead schedule the auditor asks for: how do you show which accounts each figure in the financial statements is built from?
The auditor looks at a figure in the balance sheet and asks, "where did this come from?" If the answer is in a single schedule, the audit goes faster. The schedule's columns, a trading firm example and an error found with the schedule.
An auditor usually starts from the financial statements: they take each figure in the balance sheet and trace it back to the accounting records. If the accountant maps out this path in advance in a single schedule, the auditor asks fewer questions, and the accountant sees their own mistakes before the auditor does.
Such a schedule is called a summary schedule ("lead schedule" in English-language audit practice). It is the bridge between a line item in the statements and the accounts in the trial balance.
What columns does the schedule have?
| Column | What is entered | Why it is needed |
|---|---|---|
| Line item | Name of the line in the balance sheet or the statement of financial results | Which figure is being checked |
| Accounts | Accounts that feed into this line, with contra accounts shown with a minus sign | Where the figure comes from |
| Trial balance amount | Year-end balance of each account | Link to the general ledger |
| Adjustments | Adjusting entries made after the year was closed | What has changed |
| Figure in the statements | Final amount | Link to the statements |
| Prior year | Amount one year earlier | To spot sharp changes |
| Working paper | Reference to the detailed analysis sheet (A-1, B-1...) | To find the details quickly |
Example: the balance sheet of "Lazurit savdo" LLC
Amounts are hypothetical. The firm is a wholesaler and uses a small number of accounts.
| Line item | Accounts | Balances | Figure in the statements | Working paper |
|---|---|---|---|---|
| Fixed assets (carrying amount) | 0130 − 0230 | 120 000 000 − 45 000 000 | 75 000 000 | A-1 |
| Goods | 2910 | 210 000 000 | 210 000 000 | B-1 |
| Receivables from customers (net) | 4010 − 4910 | 96 000 000 − 8 000 000 | 88 000 000 | C-1 |
| Cash | 5010 + 5110 | 4 000 000 + 61 000 000 | 65 000 000 | D-1 |
| Total assets | 438 000 000 | |||
| Payables to suppliers | 6010 | 132 000 000 | 132 000 000 | E-1 |
| Payables to the budget | 6410 | 18 000 000 | 18 000 000 | E-2 |
| Charter capital | 8330 | 100 000 000 | 100 000 000 | F-1 |
| Retained earnings | 8710 + 8720 | 48 000 000 + 140 000 000 | 188 000 000 | F-2 |
| Total liabilities and equity | 438 000 000 |
Check: assets 75 + 210 + 88 + 65 = 438 mln soum; liabilities and equity 132 + 18 + 100 + 188 = 438 mln soum.
What error did the schedule reveal?
In the first draft of the statements, receivables from customers stood at 96 000 000 soum, and on the liabilities side 8 000 000 soum stood on the "other liabilities" line. The balance sheet still balanced: both sides were 446 000 000 soum. That is why the error went unnoticed.
While filling in the schedule, the accountant Shahzoda stopped to think about which line 4910 should go on. 4910 "Allowance for doubtful debts" is not a liability, it is a contra-asset account: it reduces receivables (NAS No. 21, paragraph 217; in the chart of accounts, 4900 is of type KA). The allowance was taken off the liabilities side and deducted from receivables from customers. As a result, both assets and liabilities and equity fell by 8 000 000 soum to 438 000 000 soum.
The same logic applies to other contra-asset accounts: depreciation of fixed assets (0200) is deducted from fixed assets, and the trade markup (2980) from goods.
What should you pay attention to when preparing the schedule?
- Each account should appear on one line only: at the end of the schedule, check that all trial balance balances have been used
- Mark contra-asset accounts separately; they must never end up on the liabilities side
- Write a short comment on lines that changed significantly compared with the prior year: the auditor will ask anyway
- Show adjusting entries in a separate column, otherwise the trial balance and the statements will not agree with each other
- Build the schedule in Excel with formulas: if a balance changes, the line in the statements is updated automatically
Test yourself
5 questions on this topic: pick an option or reveal the answer.
The financial statements of "Bodomzor savdo" LLC significantly overstate revenue, inventories and receivables: the misstatements are material and spread across the main items of the statements (pervasive). The auditor confirmed this with sufficient evidence, and management refused to correct them. What opinion is expressed under ISA 705?
Every month the accountant of "Sariosiyo savdo" compares the bank statement with account 5110 and prepares a reconciliation. The auditor independently prepared one of these reconciliations again from scratch. Under ISA 500, which audit procedure is this?
Which three main inherent risk factors does ISA 540 (Revised, auditing accounting estimates) single out when assessing risks for accounting estimates?
The balance sheet of Charxpalak savdo LLC is prepared as at 31 December. In February, before the statements are authorized for issue, the auditor found that a major customer had been declared insolvent; this customer's debt also existed at the balance sheet date. What is done under NAS No. 16?
In the registers of Nurli kelajak LLC, the auditor saw the following correction: the accountant did not delete the erroneous entry but recorded it in the same amount with the debit and credit accounts swapped, and then made the correct entry. Which correction method is this?
Answered: 0 / 50 of 5 correct
All tests →See also
Sources
- NAS No. 21 "Chart of Accounts" (list of accounts) · 0200, 2980 and 4900 are contra-asset (KA) accounts; they reduce the value of the related asset
- NAS No. 21, paragraph 217 · allowances for doubtful debts are summarised in account 4910
- Example, amounts and schedule layout · compiled by the author, hypothetical