## Substantive Procedures (SA 330)

Substantive procedures are audit procedures designed to detect material misstatements at the assertion level. They come in two forms:

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### Form 1: Tests of Details

Tests of details examine individual transactions and balances directly.

Sub-type	What it tests	Example
Tests of transactions (Vouching)	Individual transactions during the period	Purchase: examine purchase invoice + GRN + inward gate entry register
Tests of balances (Verification)	Asset and liability balances at period-end	Fixed asset: physical inspection to establish existence as at balance sheet date

> Vouching → direction is from book entry back to source document (completeness check)

> Verification → direction is from physical asset/balance back to books (existence check)

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### Form 2: Substantive Analytical Procedures

Substantive analytical procedures evaluate financial information by studying plausible relationships among data. See SA 520 for full treatment.

Key uses include identifying unusual fluctuations, corroborating other evidence, and directing attention to high-risk areas.

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### Nature and Extent — Choosing the Right Mix

The auditor selects from three approaches based on assessed risks:

Approach	When appropriate
Analytical procedures only	When risk assessment is low and supported by evidence from tests of controls
Tests of details only	When the nature of the assertion or risk requires direct evidence (e.g., existence of a specific asset)
Combination	When neither alone is most responsive — typically the most common approach

> Principle: The higher the assessed risk of material misstatement, the more the auditor shifts toward tests of details and away from analytical procedures alone.

Worked example

### Example 1

Vouching a purchase: Auditor selects a debit entry in the purchases account → traces back to the purchase invoice → matches it to the Goods Received Note → checks the inward gate entry register. All three documents agree → transaction is verified as a real, recorded purchase.

### Example 2

Verification of fixed asset: Auditor selects a machine shown in the fixed asset register → physically inspects the machine at the factory → confirms it exists as at the balance sheet date → checks the cost and depreciation computation.

### Example 3

Choosing the mix: A payroll cycle has strong automated controls tested and found effective. The auditor chooses to perform substantive analytical procedures (compare payroll cost month-by-month, compare headcount-to-cost ratios) rather than detailed vouching of every payslip — risk is low and analytical evidence is sufficient.

⚠️ Common exam mistakes

Confusing vouching (transaction testing) with verification (balance testing) — they test different assertions and are performed in opposite directions.
Assuming that strong controls allow the auditor to skip substantive procedures entirely — SA 330 requires substantive procedures for every material item regardless of control testing.
Using substantive analytical procedures alone for high-risk assertions such as revenue completeness — analytical procedures are less persuasive than tests of details for high-risk areas.
Performing only one type of substantive procedure when a combination would better address the assessed risk.

Reference:

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Substantive Procedures — Tests of Details and Analytical Procedures

Worked example

⚠️ Common exam mistakes