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Substantive procedures are intended to get confirmation as to the entirety, accurateness and soundness of the data fashioned by accounting system. They are of two categories; analysis of particulars of transactions and balances and study of noteworthy ratios and trends together with the consequential inquiry of unusual fluctuation and items. When internal control system is weak or operational deviation are wide there is a need to use substantive procedures in details. The auditor can test the transaction. He can examine invoice, the price and quantity, discount and period of accounting. He can see the details recorded in the books of depreciation expense, rent income, interest expenses, labor cost and fixed overhead cost ratio.
Substantive procedures involve verification of transactions and account balances to supporting records such as invoices and ledgers. The purpose of substantive procedures is to identify material misstatements in the financial statements.
Substantive procedures consist of two activities as follows:
A) Analytical Substantive Procedures (simply known as analytical procedures or analytical review)
B) Test of Details, i.e:Test of transactions [i.e. test of income statement figures] ANDTest of account balances [i.e. test of statement of financial position figures]).
