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Hi, I have great confusion regarding principal audit procedures, when we are asked to list the principal audit procedures verify the sales figure or any end of year balance on the SOFP, do we carry out substantive procedures or do we also include some tests of control ? If not, then at what stage are the tests of controls applied ? Kindly give some examples to clarify the matter . .
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See previous post, this should help
https://opentuition.com/groups/p7-advanced-audit-and-assurance/forum/topic/principal-audit-work/Thank you Noeleenred, but I am still not completely happy with it . . Apparently only substantive testing is being applied as principal audit work/procedures, what about the tests of controls ??
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Test of controls are mainly applied when the internal control system of the entity is strong and auditors can rely on it.
Substantive procedures are applied when the internal control system of the entity is weak and auditors have to carried out detailed testing in order to reduce their audit risk.
If question does not state anything regarding entity’s internal control system then u should list all the audit procedures.plase look at the past exam papers for principal audit procedures, you’ll get the answer.
Thank you for your comments friends, really appreciate that, but as far as my knowledge guides, in the past exam papers only substantive procedures have been applied as principal audit procedures, but then, my knowledge of P7 isn’t of much substance at all and the exam is less than 2 weeks away : (
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At the begining of the audit, the auditors will look at a company’s internal controls, using tests of control. If the internal controls are weak, the auditor will increase the substanstive testing on the entity.
I would suggest reading this technical article. The principal audit procedure used will depend on the area being tested. I think the article does at better job of explaining than I would be able to do.
https://www2.accaglobal.com/pubs/students/publications/student_accountant/archive/3244818
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