SUBSTANTIVE TESTING

AND DOCUMENTATION
Auditing and Assurance Principle
 AUDIT EVIDENCE

• Nature of Audit Evidence

Accounting Records and Other Information
Corroborating Evidence
• Sufficiency and Appropriateness of Evidential Matter
Sufficiency – quantity of audit evidence
Appropriateness – validity and relevance
 GENERALIZATIONS ABOUT THE
RELIABILITY OF EVIDENCE

• Independence of the source

• Qualification of the source
• Internal control
• Nature of evidence
• Form of evidence
 NATURE, TIMING AND EXTENT OF
PROCEDURES

• Audit Procedures According to Purpose

• Audit Procedures According to Nature

 TYPES OF CONFIRMATION
REQUEST

• Positive Confirmation Request

• Negative Confirmation Request

 ANALYTICAL REVIEW PROCEDURES
Procedure RAP TOC ST
Inquiry x x x
Inspection x x x
Observation x x x
Reperformance x
Confirmation x
Recalculation x
Analytical procedures x x
 SUBSTANTIVE PROCEDURES

• Test of details of transactions

• Test of details of balances

 FRAUD AND ERROR
• Distinguishing factor between fraud and error is whether the
underlying that results in the misstatement of the FS is
intentional
 ERROR

Most Common Audit Procedures that help uncover

errors:
• Scrutiny of books
• Comparison of trial balance and ledger account
balance
• Intensive and careful verification of subsidiary
records, vouchers and ledgers
 FRAUD

Common Fraud in Accounting Estimates (PwC):

• Longer estimated useful life of assets
• Capitalizing expenses
• Bigger recoverable amount
• Avoiding provisions for claims/liabilities
 FRAUD AND ERROR

Higher Profit and Assets than the Actual

Frequent Answers:
1. Fraud is not happening
2. They are not aware of any fraudulent activities
3. Controls are operating effectively
 FRAUD AND ERROR

Opportunity Motivation

Rationalization
 FRAUD AND ERROR

Metropolitan Bank & Trust Company

P1.75B
Maria Victoria Lopez
 AUDIT DOCUMENTATION

• Functions of Audit Documentation

• Form and Content of Audit Documentation
• Classification of Audit Documentation
Permanent file
Current File
 WORKING PAPER ELEMENTS AND
CONSIDERATION
• Elements of Working Paper
• Ownership, Custody and Confidentiality
 WORKING PAPERS

Key Characteristics of Working Paper

1. Accurate and reliable
2. Relevant and concise
3. Complete
4. Adding value
5. Neat and legible