What Is Substantive Procedure?

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Anonymous Profile
Anonymous answered
Are procedures performed by auditors to detect material misstatement in the financial statement e.g to check accuracy, completeness and validity of the financial statement
Amen Bukhari Profile
Amen Bukhari answered
Substantive procedures are intended to get confirmation as to the entirety, accurateness and soundness of the data fashioned by accounting system. They are of two categories; analysis of particulars of transactions and balances and study of noteworthy ratios and trends together with the consequential inquiry of unusual fluctuation and items. When internal control system is weak or operational deviation are wide there is a need to use substantive procedures in details. The auditor can test the transaction. He can examine invoice, the price and quantity, discount and period of accounting. He can see the details recorded in the books of depreciation expense, rent income, interest expenses, labor cost and fixed overhead cost ratio.

The trend percentage may be calculated for many years.
The unusual items may be checked. The sale of large part of undertaking may be there. The auditor is bale to form an opinion about the business activities through the substantive test. In case of large data sampling may be made to test the data. The purpose is to determine the completeness, accuracy and validity of it.
Some evidences are required for substantive procedure. The items appearing in financial statements are under accepted accounting polices. There is full disclosure of information as per statutory requirements.

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