Page 108 - AA Integrated Workbook STUDENT 2018-19

Chapter 73 4

3.3 Substantive procedures

 Test the numbers in the financial statements

 The auditor may choose to rely solely on substantive testing where it is
considered to be a more efficient or more effective way of obtaining audit
evidence, e.g. for smaller organisations.

 The auditor may have to rely solely on substantive testing where the client's
internal control system cannot be relied on.

 Substantive procedures must always be carried out on material items.

ISA 330 The Auditor's Response to Assessed Risks requires the auditor to carry out
the following substantive procedures:

 Agreeing the financial statements to the underlying accounting records

 Examination of material journals

 Examination of other adjustments made in preparing the financial statements.

Example 3

Substantive procedures

The financial statements of Andes Co contain a balance of $1m for the land
and buildings from which the company operates.

The auditor can test this balance by obtaining a property valuation report from
an expert to confirm that the balance of $1m is valued appropriately.

In addition, the auditor will also inspect the title deeds to the property for the
name of the client to confirm that Andes Co has the right to include the asset
in their financial statements.

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