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Hi
I watched all the videos regarding Tests but i am still confused..
So substantive test are Financial statement assertions which is Completeness, accuracy cut off and etc.
And analytical procedures/ test are compassion, level of difference, reliability etc.
I understand the content but its very confusing.Thanks again
There are 2 types of substantive procedure – tests of details and substantive analytical procedures – both can be designed for financial statement assertions.
For example – assertion completeness for revenue:
A test in total (reasonableness test) using a mark-up on known cost of sales to calculate what revenue should be/comparing with recorded revenue/investigating any differences (e.g. due to discounts).
A test of detail would be tracing goods outwards to invoices/agreeing prices to a price list/checking calculations/tracing invoice amount to sales day book/tracing SDB total to the sales a/c in the general ledger.So assertions are two types
1)Classes and events related to disclosure for the period of audit like salary expenses: includes-Completeness, Accuracy, Occurrence,etc
2)Account balances related to dislodge at year end like assets, liability, inventory etc
includes: COVECP completeness, accuracy etc.
Second step is to find evidence which consist of AEIOU-analytical procedure, Inquiry etc.
and these can be test of controls?
Doubts-
1)My above information is correct?
2)where do we have to apply substantive test of detail and analytical procedure?
3)Test of control and test of details is same thing?Thanks
1) essentially yes – but tests of controls do not include analytical procedures. (Also, inquiry ALONE, would never be sufficient as a test of control.)
2) Substantive analytical procedures are optional – they would be designed if an efficient/effective way of obtaining evidence. Some substantive procedures (analytical and/or tests of details) must always be carried out on material items – reliance on TOCs would not be sufficient.
3) NO – TOCs test controls (monetary amounts are irrelevant)
Tests of details substantiate monetary amountsSo Test of detail will be basically our opinion on the problems or which is given in chapter like sales, purchase, cash and bank and inventory.
Substantive test is related to numbers it inclodues vouching, sampling etc?
Am I right?I do not understand what you mean by “opinion on the problems”.
The terms “substantive test”/”substantive test of detail”/”test of detail” all mean the same thing.
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