What Is Substantive Approach?


1 Answers

Connor Sephton Profile
Connor Sephton answered
There are many different auditing methodologies, or approaches, and the substantive audit approach is indeed well known. This is where the auditor will try and verify nearly each and every transaction on his or her own without relying on any information that has been provided by the management.

To clarify - there is no reliance placed on the internal control system of the entity in question, and any information that has been produced on that particular system. This means that the auditor will be required to 'vouch' for everything by conducting a detailed and thorough examination of the financial information and the underlying financial statements available.

This approach is also known as the vouching approach. It is also sometimes known as the direct approach or the direct verification approach. This is one of the traditional approaches that was actually more popular before the risk-based audit approach had been developed.

The many different types of auditing approaches can be used by any auditor if they intend to conduct an audit engagement. There is no real way of knowing which form of audit approach is better, or which one should be used to the highest extent. It was very much true, and it remains true still, that the kind of approach that is used was and is dependent on the audit firm and its preferences.

Vouching can be done by an auditor by examining the whole accounting process from the very beginning to the end, and then of course observing the accounting process that would have taken place in regards to the transaction. It also involves measuring the monetary effect of transactions as well as measuring the classification of transactions and of course the recording of the transaction. If you have a preferred form of approach then it's down to you to talk to the firm about it.

Answer Question