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In: Accounting

Describe the process an outside auditor uses to analyze an organization’s transactions to ensure accuracy.

Describe the process an outside auditor uses to analyze an organization’s transactions to ensure accuracy.

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Expert Solution

Substantive procedures are procedures to obtain evidence which an auditor collects to support the assertion that no material misstatement exists with regards to accuracy, completeness, validity of financial statements and records. These procedures are performed to detect any material misstatement which may exist. Accuracy is therefore checked by an auditor through the substantive procedures.

The following activities are generally performed for the substantive procedures -

  • Testing of transactions, balances of accounts and disclosures
  • Tracing of amounts in financial statements to the underlying accounting records
  • Checking of the accounting entries and postings made for the preparation of financial statements.
  • Examining documentation to understand the procedures and controls
  • Reperforming procedure to check its effectiveness
  • Inquiring or observing.

Some examples of substantive procedures are -

  • Bank confirmation
  • Debtors confirmation
  • Observe a physical inventory count
  • Analytical analysis

ekkarill92 answered 2 years ago
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