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Hello sir,
Sir am really struggling with substantives procedures can you help me like how to ace them as fast as possible as am giving the June attempt and the date to paper is near and I don’t have a lot of time but I am free till the exam can give day and night just need a guide
Thanks a lot in advance.
You’re not giving me a lot to go on (!) In what way “struggling”?
The general meaning of “substantiate” (verb) is “to show something to be true, or to support a claim with facts”.
The ISA defines a “substantive procedure” as “An audit procedure designed to detect material misstatements at the assertion level” … i.e. it detects misstatement by showing that a claim (an ASSERTION) is not true.
See the assertions on pages 85 and 86 of the notes – management ASSERTS that revenue (say) is COMPLETE. The auditor will therefore design substantive procedures (analytical procedures and/or tests of details) capable of DETECTING whether revenue is understated by a material amount.
See at the bottom of this page https://opentuition.com/acca/aa there is an article “Audit tests: the difference between tests of control and substantive tests”
Sorry for the insufficient detail I have given. Sir the problem I am having is I am not able to draft the substantive procedures. When I get to the substantive question I don’t know where to start and I also get confused about where which assertions are being used.
I know the difference between tests of controls and substantive procedures don’t have a problem with that and also have remembered the mnemonic AEIOU.
Sir, I think the main issue am having is when being asked about the substantive procedure for going concern, receivables, payables, revenue, provision, or any other. I have a problem knowing whether I will use the assertions about classes of transaction and events and related disclosures or about account balances and related disclosures
Hopefully, my issue will be solved after this, and sorry for my English (for any mistakes)
Thanks a lot for your time and all the help.
A substantive procedures question may specify the assertion(s) e.g.:
“Describe substantive procedures the auditor should perform to obtain sufficient and appropriate audit evidence in relation to the COMPLETENESS of X Co’s trade payables and accruals.”
Or it may not e.g.:
“Describe substantive procedures the auditor should perform to obtain sufficient and appropriate audit evidence in relation to X Co’s revenue.”
If the “something” would be in the SoFP (e.g. trade payables and accruals) it is a balance (the SoFP used to be called “the balance sheet”) – if the “something” would be in the SoPL (e.g. revenue or any expense item) it is a class of transactions. Whatever the something is – you should look to the scenario for clues to narrow your answer down to relevant assertions – as there will most likely be only 5 marks available. For example, the scenario might have a sentence like:
“During the audit planning, the completeness and cut-off of revenue was flagged as a key audit risk.”
Going concern is not a class of transactions or account balance – it is the assumed basis of preparation of the financial statements as a whole – see at the top of page 39 for some examples of audit evidence.
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