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Hello could you please help me with the difference or definations of the three procedures. Substantive procedures, analytical and tests of controls.
Thanks.
Tests of controls test controls. Eg has an order been authorised? Has a bank reconciliation been performed.
Substantive tests test financial statement figures directly. So, a receivables circularisation is a substantive test on the existence and ownership of receivables.
Substantive tests are of two types:
1 Tests of detail (look at lots of transactions etc, so circularise many customers))
2 Analytical procedures (ratios and comparisons). So, look at receivables days to get some evidence about receivables.
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difference between substantive procedure and analytical procedure
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