Substantive procedures

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June 2, 2022 at 3:02 pm #657144
Emad..
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Hi, sir hope you doing fine.

I wanted to ask whether it is a must for to us include IAS or IFRS standards number we writing the substantive procedures for disclosure.

E.G (research and development substantive procedures)
1. Review the adequacy of the disclosures to assess whether it is in accordance with accounting standard and local legislation

2. Review the disclosures for intangible assets in the draft financial statements to
verify that they are in accordance with IAS 38 Intangible Assets

I write the number 1 usually and wanted to know whether will I gain 1 mark or not for the procedure I have written

And sir can you explain the substantive procedure used in the kit which I don’t understand

Perform a proof in total calculation

where I can and where I can’t use this procedure and what it means

Thanks a lot in advance for the help sir.
June 2, 2022 at 4:25 pm #657154
Kim Smith
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As indicated by the most recent examiner’s reports – to refer to “reviewing the disclosure is in accordance with accounting standards” is enough – you don’t need to reference IFRS Standards – I don’t think you need to reference “companies act legislation” (or similar) unless it is something that might be prescribed in legislation – e.g. requirements to disclose directors’ remuneration.
June 2, 2022 at 4:34 pm #657155
Kim Smith
Keymaster
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“Proof in total” also called “reasonableness test” is a substantive analytical procedure relevant to the assertions of completeness and accuracy of items in profit or loss. It is a calculation of the auditor’s expectation of what an amount should be – if the amount recognised in the financial statements is sufficiently close/within performance materiality, it is materially correct.

Examples (simplified):
Average # of employees on payroll x average weekly wage = salary expense
(Opening cost of a class of PPE + additions – disposals) x depreciation % = depreciation expense
Average monthly overdraft x average borrowing rate for the year = interest expense
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