2. Types of audit procedures

Substantive procedures are designed to detect material misstatements at the assertion level.

They consist of:

1. tests of details applied to transactions, balances, and disclosures; and

2. substantive analytical procedures.

Directional testing refers to testing either forward or backward.

1. Tracing forward from source documents to journal entries provides evidence of completeness.

2. Vouching backward from journal entries to source documents provides evidence of existence.

External confirmation is a form of audit evidence obtained as a direct written response to the auditor from a third party, either in paper form or by electronic or other medium. An oral response to a confirmation request does not meet the definition of an external confirmation.

3. Review of relevant assertions

When audit procedures relate to asset, liability, and equity account balances, the most relevant assertions are:

• Completeness

• Valuation, allocation, and accuracy

• Existence and occurrence

• Rights and obligations

• Understandability of presentation and classification

When testing transactions, the most relevant assertions are:

• Completeness

• Cutoff

• Valuation, allocation, and accuracy

• Existence and occurrence

• Understanability of presentation and classification