Which of the following is a substantive procedure?

Tolerable error is the maximum error in the population that auditors are willing to. accept and still conclude that the audit objective has been achieved. Tolerable error is considered during the planning stage and, for substantive procedures, is related to the auditors’ judgment about materiality.

Overall materiality is the level that is judged by the auditor to represent what is significant to the financial statements as a whole – the point at which the investment decisions of the users would be influenced.

Performance materiality is an amount less than the level of overall materiality, and is reduced in order to allow for the risk that there may be several smaller errors or omissions that have not been identified by the auditor. … The level of performance materiality can be set at different levels for different accounts.

Examples of Substantive Procedures Accounts receivable confirmation. Inquire of management regarding the collectibility of customer accounts. Match customer orders to invoices billed. Match collected funds to invoices billed.

Substantive testing is sometimes called detail testing where the main objective is to verify the balances, transactions, and disclosures of financial statements. The auditor could not use the result of the test of control to make the conclusion that the financial statements are true and fair view.

Terms in this set (8)

• physical examination. inspection or count or tangible assets. …
• confirmation. receipt of written or oral repsonse from independent 3rd party, verifying accuracy of info requested by auditor. …
• inspection (documentation) …
• recalculation. …
• client inquiries. …
• re-performance. …
• analytical procedures. …
• observation.

Top 6 Trends in Accounting and Auditing for 2020

• Hiring the Right Talent. …
• Investing in Blockchain. …
• Diversification in Credentialing. …
• Continued Training in Data Analytics. …
• Employees Familiar with Information Systems. …
• Knowledge of Automation and AI.

Different types of audit

• Internal audit. Internal audits take place within your business. …
• External audit. An external audit is conducted by a third party, such as an accountant, the IRS, or a tax agency. …
• IRS tax audit. …
• Financial audit. …
• Operational audit. …
• Compliance audit. …
• Information system audit. …
• Payroll audit.

Auditing – Audit Techniques

• Vouching. When the Auditor verifies accounting transactions with documentary evidence, it is called vouching. …
• Confirmation. …
• Reconciliation. …
• Testing. …
• Physical Examination. …
• Analysis. …
• Scanning. …
• Inquiry.

The basic principles of auditing are confidentiality, integrity, objectivity, and independence, skills and competence, work performed by others, documentation, planning, audit evidence, accounting system and internal control, and audit reporting.

An internal audit should have four general phases of activities—Planning, Fieldwork, Reporting, and Follow-up. … The process of issuing an internal audit report should include drafting the report, review the draft with management to ensure the accuracy of findings, and issuance and distribution of the final report.

An auditor is a person authorized to review and verify the accuracy of financial records and ensure that companies comply with tax laws.