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Substantive Testing / Tests on Internal Controls

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AA Exams › Substantive Testing / Tests on Internal Controls

  • This topic has 6 replies, 2 voices, and was last updated 7 years ago by feroz.
Viewing 7 posts - 1 through 7 (of 7 total)
  • Author
    Posts
  • November 18, 2017 at 3:54 pm #416460
    feroz
    Member
    • Topics: 4
    • Replies: 38
    • ☆

    Hi Sir,

    Could you please kindly explain the difference in the two?

    November 18, 2017 at 5:45 pm #416475
    Ken Garrett
    Keymaster
    • Topics: 10
    • Replies: 10591
    • ☆☆☆☆☆

    Look here:

    https://opentuition.com/articles/f8/audit-tests-difference-tests-control-substantive-tests/

    Also consider this lecture:

    https://opentuition.com/acca/f8/f8-financial-statement-assertions-and-audit-evidence/

    November 18, 2017 at 6:05 pm #416476
    feroz
    Member
    • Topics: 4
    • Replies: 38
    • ☆

    Thank You.

    November 18, 2017 at 6:59 pm #416478
    Ken Garrett
    Keymaster
    • Topics: 10
    • Replies: 10591
    • ☆☆☆☆☆

    Hope the links are helpful.

    November 18, 2017 at 7:45 pm #416498
    feroz
    Member
    • Topics: 4
    • Replies: 38
    • ☆

    They are very helpful indeed and have helped enhance my understanding.

    Sir to add to this I have been reading articles on Acca’s website for f8 – Audit Risk,

    I have been through the course notes as well.

    But in relation to the article it states that ISA 315 Deals with the auditors responsibility to identify and assess the risks of material misstatement through understanding the entity,environment and internal controls.

    It is then further broken down into 4 parts, I pretty much understand them but the terminology being used on part 1 has really confused me on – Put in exclamation marks below. Could you please kindly help once again?

    Point 1)Perform Risk Assessment procedures in order to “provide a basis for the identification and assessment of the risks of Material Misstatements.”

    November 18, 2017 at 8:59 pm #416510
    Ken Garrett
    Keymaster
    • Topics: 10
    • Replies: 10591
    • ☆☆☆☆☆

    Risk assessment procedures include:

    Interviewing the finance director about problems changes, fraud.
    Seeing what problems there had been previously by looking at last year’s audit file.
    Walking around looking at the state of premises, machinery, stores, documentation
    Analytical procedures.
    Understanding the nature of the business and what is at risk (eg inventory in a jewellery shop).

    All of these procedures help the auditor to identify areas most at risk of material misstatement. Eg the FD might tell you that a new IT system had been implemented during the year so risk that balances were incorrectly transferred and also that staff make errors using the new system.

    Where ever there are more risks, more audit work is needed to try to collect evidence that the FS do not contain material mistatements.

    November 18, 2017 at 9:10 pm #416519
    feroz
    Member
    • Topics: 4
    • Replies: 38
    • ☆

    Thanks once again your answer is much appreciated.

  • Author
    Posts
Viewing 7 posts - 1 through 7 (of 7 total)
  • The topic ‘Substantive Testing / Tests on Internal Controls’ is closed to new replies.

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