Question

In: Finance

Which one of the following would not be considered a substantive audit procedure?

Which one of the following would not be considered a substantive audit procedure?
A. Obtaining a letter from an investment broker confirming an account balance.
B. Using generalized audit software to identify all accounts receivable over 90 days outstanding.
C. Selecting a sample of sales orders and checking that all orders are authorized by a sales manager.
D. Multiplying the number of employees on each pay scale by the yearly pay rate to determine an estimate of payroll expense.

Solutions

Expert Solution

Option B

Using generalised audit software to identify all accounts receivable over 90 days outstanding

 

Reason

Substantive audit procedures are done by auditor to create evidence that there are no material misstatements in regard to the completeness, validity, and accuracy of the financial records of a company.

 

Substantive procedures include obtaining confirmation for account balances, taking samples of inventory and verifying pay scale of employees.

 

However, using a generalised audit software to identify all accounts receivable over 90 days outstanding is only a part of regular accounting done by a company and not a substantive procedure.


The option (B) is required option.

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