What is the difference between Substantive Procedures & Analytical Procedures

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  • #1537491 Reply

    Hi All,

    Can you guys help me understand the difference between
    1)Substantive Procedures
    2)Substantive Analytical Procedures and
    3)Analytical Procedures?


    #1537501 Reply

    Disclaimer: I suck at Audit. However, I just studied this literally minutes ago, so, hopefully, I can get it right. People who know more, please correct me if anything is wrong.

    Substantive analytical procedures and analytical procedures are the same thing (I think, because it seems like the terms are used interchangeably).

    Substantive procedures are used during an audit to test for a material misstatement of the financial statements.

    Substantive procedures are comprised of Tests of Details and Analytical procedures.

    Test of details test ending balances in accounts and test transactions when there are few that cause an account to change from one year to the next.

    Analytical procedures look at relationships between financial and nonfinancial information to test for reasonableness often using selected ratios.

    Tests of details cost more/are more labor intensive, but yield better information than analytical procedures.

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    #1537585 Reply

    Analytical procedures are more high level, ration driven analysis. For example, comparing Accounts Receivable turnover to prior year.

    Analytical procedures are used during the planning phase, and in the final review phase.

    If internal controls are strong enough (which we'll know from tests of controls), or if circumstances warrant, analytical procedures can be used in place of substantive tests to test balances. I think in this situation, Substantive Analytical Procedures like you list above is the correct phrase for these analytical procedures.

    Substantive tests, aka tests of balances, are more statistical driven and really dig into the details of the balances themselves.

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    #1537591 Reply
    Mike J

    Analytical Procedures ARE $ubstantive Procedures.

    Notice the S in substantive. There are two main types of activities auditors perform–tests of internal controls and $ubstantive testing. Int Ctrl tests have to do with finding an error in processesing data. Whereas, $ubstantive testing has to do with dollar amounts.

    Analytical Procedures are simple procedures. They're​ used as a sort of diagnostic. You use them in the planning phase and in the review phase. Examples include evaluation of estimates, financial ratios, etc.

    On exam day, you can often narrow down choices if you know the question is looking for either a figure ($ubstantive) or whether to detect an error in a procedure (int Ctrl)

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    #1537599 Reply

    Mike030882 Thanks for the exam hint, its the difference between knowledge alone and knowledge with exam skills.
    Well said.

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    #1537800 Reply
    Mike J


    I'm glad I could help. I try to share knowledge.

    Unrelated question, is your handle from the movie Old School?

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    #1538140 Reply

    Good thread for this: https://www.another71.com/cpa-exam-forum/topic/substantive-testings-and-analytical-procedures/

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    #3311803 Reply

    Substantive procedures(SP) are audit procedures used gain audit evidence (AE) that the FS are free from material misstatement at the assertion level.
    Assertions are specific or otherwise representations made by the management in the FS, so SP are used to test these assertions for material misstatements.
    SP can be further divided into detailed Test of Details (ToD) and Analytical Procedures (AP).
    Not all assertions can be tested using ToD which sacrifices on efficiency but are very effective in the limited timings of the audit, also its easy and sometimes provide enough appropriate AE and assurance, to just follow the linkages between financial and non financial data of assertions and how they effect each other. This studying of linkages is called AP.
    AP when used as a SP may be called as a Substantive Analytical Procedure(SAP).
    Personally I think both are the same, the only difference is the context. When reading ISA 315 you won't find SAP but when studying ISA 520(I'm quoting from SA 520 which is basically copy of ISA 520) it does mention ” This Standard on Auditing (SA) deals with the auditor's use of AP as SP (“substantive analytical procedures”)”.

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