Page 89 - CA Inter Audit PARAM

CA Ravi Taori
➢ Substantive Analytical Procedures: Substantive analytical procedures are generally more applicable
to large volumes of transactions that tend to be predictable over time. SA 520, “Analytical
Procedures” establishes requirements and provides guidance on the application of analytical
procedures during an audit.

➢ Test of Details: The nature of the risk and assertion is relevant to the design of tests of details. For
example, tests of details related to the existence or occurrence assertion may involve selecting from
items contained in a financial statement amount and obtaining the relevant audit evidence. On the
other hand, tests of details related to the completeness assertion may involve selecting from items
that are expected to be included in the relevant financial statement amount and investigating
whether they are included. (List to actual stock→ Existence and actual stock to list→ Completeness)

➢ External Confirmation
Other Points
The auditor shall consider whether external confirmation procedures are to be performed as
substantive audit procedures.

➢ Effect of Test of Controls
Because the assessment of the risk of material misstatement takes account of internal control, the
extent of substantive procedures may need to be increased when the results from tests of controls
are unsatisfactory. In designing tests of details, the extent of testing is ordinarily thought of in terms
of the sample size. However, other matters are also relevant, including whether it is more effective to
use other selective means of testing.

➢ Closing Process
The auditor’s substantive procedures shall include the following audit procedures related to the
financial statement closing process:
• Agreeing or reconciling the financial statements with the underlying accounting records; and
• Examining material journal entries and other adjustments made during the course of preparing
the financial statements.
The nature, and also the extent, of the auditor’s examination of journal entries and other
adjustments depends on the nature and complexity of the entity’s financial reporting process and
the related risks of material misstatement.

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