3/24/2020

Characteristics
of good
substantive
procedures
1

Characteristics of good substantive

procedures
• A well-designed substantive procedure have some characteristics:

Example
Clear The marker is clear as to why you are Inspect the contract is
objectives performing the procedure OR group of signed
procedures VS
Inspect the contract is
signed to verify it is in the
name of XYZ and is valid.
It should be Given the scenario and limitations of Recalculate VAT on all
realistic and auditing, the procedure should be realistic invoices
practical and practical. VS
Select a sample of
expenses, for sample
selected recalculate VAT
and agree to the journal
entries.

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 3/24/2020

Characteristics of good substantive

procedures
• A well-designed substantive procedure have some characteristics:
Example
It is applied Be sure not to memory dump generic lists Select a sample of long
and not – if you have a list of procedures to apply outstanding debtors and
generic to debtors, be sure to think through it, assess for impairment
assess which are applicable and make VS
them applicable. Select a sample of
debtors outstanding for
longer than 60 days and
assess for impairment.
The level of Get good coverage of all the issues as 10 procedures on going
detail should opposed to in depth coverage of one concern
match mark balance/ assertion/ risk etc VS
allocation 2-3 on going concern/ 2-3
on subsequent events
and 2-3 analytical reviews

Characteristics of good substantive

procedures
• A well-designed substantive procedure have some characteristics:
Example
It is sufficiant Nature, timing and extent – adapted to Perform substantive
and suit risk of an account balance or procedures on revenue
appropriate transaction. VS
for the risk. Know how to adapt tools an auditor has. Perform TOD on high risk
balances subject to
management bias I.e. XXX
and AR on low risk
balances I.e YYY
Clear, This is exam technique and comes with See practical activity 1 in
concise and practice. this topic
to the point

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Thank You