Append below are some notes pertaining to understand what is Substantive Procedures and its purposes in audit:
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Substantive Procedures In An Audit
· (b) Analysis of significant ratios and trends which also include the investigation of any unusual fluctuation and items whether in the Income Statement or Balance Sheet Purpose of Substantive Procedures: Enable an auditor to be assured of the following: (a) Existence · That an asset/liability exists at a given date (b) Rights & Obligations: · That an asset is a right of the entity and a liability is an obligation of the entity at a given date © Occurrence · That a transaction or event took place which pertains to the entity during the relevant period (d) Completeness · That there are no unrecorded assets, liabilities or transactions (e) Valuation · That an asset/liability is recorded at an appropriate carrying value (f) Measurement · That a transaction is recorded in the proper amount and revenue or expense is allocated to the proper period (g) Presentation · An item is disclosed,classified and described in accordance with recognized accounting, policies and practices and relevant statutory requirements if any. Salient Points: 1. By using Substantive procedures, the auditor is trying to obtain evidence as to the existence, completeness, measurement, rights, obligations occurrence, valuation and presentation and disclosure of transactions and balances. 2. Therefore, the extent and nature of substantive procedures to be performed will vary with respect to each of the above assertions. Obtaining evidence relevant to one of the above assertions will not compensate for failure to do so with respect to another matter concerning the same item e.g. existence of inventory and its valuation. |
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