Question

Describe the difference between cycle testing and substantive testing.

Answer 1

Difference between cycle testing and substantive testing:
Sr.No.	Points of differentiation	Cycle Testing	Substantive Testing
1)	Forms part of	This forms part of Control Environment testing while performing audit procedures.	This forms part of Test of details while performing audit procedures.
2)	Dependent upon	Quantum of Cycle Testing (i.e. sample size while performing cycle testing) is dependent upon the prior experience of the control environment and a general understanding of the control environment.	The sample size while performing substantive testing is dependent upon results of cycle testing. The area in which cycle testing has shown weak control environment will require higher substantive testing, on the contrary, the area in which cycle testing has shown effective controls will require lower substantive testing.
3)	The sequence in overall audit procedure	This is the first step while performing audit.	This comes after cycle testing is done.
4)	Reporting	Results of this testing are reported in auditors comment on controls over financial reporting.	The results of this testing are reported in the auditor's report on financial statements.
5)	Effect on Materiality	Cycle testing is not affected by materiality but its results lead to determine overall materiality, performance materiality and amounts clearly incosequential.	Substantive Testing is affected by the overall materiality, performance materiality and amounts clearly incosequential. Any change in materiality will lead to change in substantive testing.