Substantive testing comprises audit procedures designed to gather evidence to validate account balances and transaction details rather than relying solely on internal controls.
Key Approaches:
- Sampling and examining significant individual items to verify accuracy and occurrence
- Confirming account balances and terms with outside parties for added substantiation
- Reperforming calculations and reconciliations toflagged problem areas
Example:
An auditor conducted substantive payroll testing by comparing wages across pay periods to prior year and inquiring with select employees.
Takeaways:
Substantive tests are a necessary audit component to directly gauge reliability. Risk-based sampling adds rigor versus complete assessment. Though thorough, resource constraints necessitate focus on material accounts and assertions with irregular histories.