In this chapter, students will be able to understand: identify and distinguish between tests of controls and substantive tests of transactions, and between substantive tests of transactions and substantive tests of balances; Describe and understand the use of computer-assisted audit techniques in substantive testing. | Chapter 10 Substantive Tests of Transactions and Balances 10- Copyright 2006 McGraw-Hill Australia Pty Ltd Revised PPTs t/a Auditing and Assurance Services in Australia 3e by Grant Gay and Roger Simnett Slides prepared by Roger Simnett Relationship Between Evidence Gathering Procedures Auditor has to obtain sufficient appropriate evidence to support the audit opinion. Tests of controls (chapter 9) and substantive tests of transactions and balances are the main evidence-gathering procedures. Auditor selects most efficient and effective combination of audit procedures that allows them to achieve audit objective. Assertions are used to help them in their risk assessment of material misstatement, and to direct their audit procedures to the assessment of these risks. Learning Objective 1: 10- Copyright 2006 McGraw-Hill Australia Pty Ltd Revised PPTs t/a Auditing and Assurance Services in Australia 3e by Grant Gay and Roger Simnett Slides prepared by Roger Simnett Relationship Between Tests of Controls and Substantive Tests of Transactions Most controls are built around transaction flows. Tests of controls: transactions selected to test whether related controls are working. Does not directly measure monetary error in accounting records. Substantive test of transactions: transactions selected to determine whether monetary errors have occurred. 10- Copyright 2006 McGraw-Hill Australia Pty Ltd Revised PPTs t/a Auditing and Assurance Services in Australia 3e by Grant Gay and Roger Simnett Slides prepared by Roger Simnett Dual Purpose Tests These are tests of transactions that address both control and substantive matters simultaneously. Very common in practice since both tests of controls and substantive tests of transactions involve inspection of documents. It is efficient to perform tests of control and substantive tests on transactions selected simultaneously, . select document and check evidence of authorisation (test of control) and recompute . | Chapter 10 Substantive Tests of Transactions and Balances 10- Copyright 2006 McGraw-Hill Australia Pty Ltd Revised PPTs t/a Auditing and Assurance Services in Australia 3e by Grant Gay and Roger Simnett Slides prepared by Roger Simnett Relationship Between Evidence Gathering Procedures Auditor has to obtain sufficient appropriate evidence to support the audit opinion. Tests of controls (chapter 9) and substantive tests of transactions and balances are the main evidence-gathering procedures. Auditor selects most efficient and effective combination of audit procedures that allows them to achieve audit objective. Assertions are used to help them in their risk assessment of material misstatement, and to direct their audit procedures to the assessment of these risks. Learning Objective 1: 10- Copyright 2006 McGraw-Hill Australia Pty Ltd Revised PPTs t/a Auditing and Assurance Services in Australia 3e by Grant Gay and Roger Simnett Slides prepared by Roger Simnett Relationship
