Substantive testing is the stage of an audit when the auditor gathers evidence as to the extent of misstatements in client’s accounting records or other information. This evidence is referred to as substantive evidence and is an important factor in determining the auditor’s opinion on the financial statements as a whole. The audit procedures used to gather this evidence are referred to as substantive procedures, or substantive tests.

4.       IMPORTANT RATIOS: Important ratios may be calculated under substantive procedure. The analytical procedure can be applied to depreciation expense, property rent income, interest expense fixed overhead expenses, direct labour cost and salesmen commission expense.
5.       TREND PERCENTAGE: Trend percentage can be calculated
under substantive procedure. In case of income statement net sales is considered as base and every item is expressed as a percentage of sales. In balance sheet, total amount is considered as base and every item is stated as a percentage of total value. The data is used for many years to note the trend of the items.

6.       UNUSUAL CHANGES: The substantive procedure can be used to note unusual changes in the business. The management may sell a part of business enterprise. There is no other procedure to trace
such items. But substantive procedure is helpful to locate and examine such items.
11.    BUDGETING: The substantive test depends upon budgeting. The actual figures can be compared with budgets. It is reliable in case of large-scale business. The small’company may prepare budget based on estimates. But it cannot reflect true position due to lack of experience.
12.    REPRESENTATION LETTER: The management may write a letter to the auditor to provide the information needed by him for audit purpose. The substantive procedure requires representation letter for queries raised by the auditor. The officer concerned can provide facts and figures that can be used for audit.
13.    LETTER FROM LAWYER: The lawyer can provide information to the auditor about pending legal cases. There may be uncertain position relating to court cases. The lawyer can know the legal position. He can inform the auditor about the gain or loss due to such court cases.
14.    SCRUTINY: Scrutiny is a part of substantive procedure to examine the validity of data. The auditor is able to find out unusual transactions or other information. He can go through the original entry and nominal ledger for all or large number of transactions.15.    CHECKING MINUTES: The auditor can examine the minutes of board of directors, committee of directors and shareholders meetings. The auditor can see that decisions are implemented in the accounting record.
11.    MATERIALITY: The substantive test can rely on materiality technique. Materiality refers to the magnitude or nature of a misstatement (including an omission) of financial information either individually or in the aggregate that, in the light of surrounding circumstances, makes it probable that judgement of a reasonable person relying on the information would have been influenced or his decision affected, as a result of misstatement.12.    SIZE OF ITEMS: The nature and size of item can be useful for testing the reliability of data. The substantive procedure can require checking the size of items.
. CORRELATION WITH OTHER ACCOUNTS: Substantive Procedure can be applied to test the accuracy of figures. Correlation is a technique in substantive procedure. The relationship of one item is compared with another. The sales commission has correlation with sales and carriage inward has a relationship with purchases.
Substantive test for purchase has been given. The auditor can
Purchase orders relate to nature of business activities.
Goods have been checked as to quality and quantity.
Copies with purchase, accounting and storekeeper must be in
Goods received record must tally with creditors invoice note.
Purchase ledger balance and suppliers statement must tally.
Purchase ledger debit balance should be reviewed.
Purchase invoices have been looked for accounting classification
Purchase invoice calculation should be checked.
Posting of various accounts should be examined through
Control accounts balance should tally with list of balance.
Check unusual nominal account balance.

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