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Hi sir, I’ve came through this question 4(b) on June 2012 paper and it requires us to describe the substantive procedure on Depreciation and Food Poisoning. I had review the answer and one of the answer given were “Review the details of the claim made by the customer to evaluate the likelihood of the claim being successful.”
I thought substantive procedure were only calculation? or it may extend to other control if the substantive procedure were limited to provide?
Much thanks!
You might be getting mixed up with analytical procedures, which are calculations of ratios and comparisons to previous periods and to busgets.
Substantive procedures comprise analytical procedures and tests of detail. Tests of detail include procedures such as tracing items from cash book to invoice and to the purchases ledger, inspecting documentation and so on. Therefore reviewing (inspecting) details of customer claims is a substantive procedure.
Note that inspecting these claims is not a test of control as the auditor is not inspecting a control. The ausitor is inspecting and assessing the claims himself/herself.
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