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Hi,
In regards to substantive testing. We are checking the figures are correct in the IS, SFP and disclosure.
We use certain assertions for each of the above FS (remembered by Acca cover) then to prove the we use AEIOU? Is that correct.
And for test of control we are checking the systems of payables. Receivables etc are working properly. Do we use Acca cover or aeiou in the control testing as well?
Regards
AJ
You are pretty much correct:
Substantive = check the figures in the FS. You need evidence to support each relevant assertion (ACCA COVER).
Evidence is collected via AEIOU.
For tests of control, you are not testing any assertions, you are testing that the controls are working properly.
Evidence that controls are working come from EIOU. Analytical procedures cannot be used to test the operation of a control.
Hi Sir,
Thanks for the clarification. It has helped me too, but I still have this little doubt:
If tests of controls have been found to be working effectively, are substantive procedures required?Yes, even if controls are working very well substantive tests are always required, though they are much reduced.
Controls might work well, but they are never foolproof – for example human error is always a possibility. As an auditor you would feel very foolish if, for example, someone had mixed up the cash balance and the inventory balance when these were entered onto the SOFP.
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