What is Audit Substantive Testing

What is Audit Substantive Testing

There are numerous tests and approaches that the auditors in the audit firms in Johor Bahru can perform when they are auditing the financial statements of various companies. Substantive procedure or substantive testing is an audit approach that an auditor would use to acquire audit evidence so that the evidence can support the auditor’s opinion. The substantive audit approach consists of this testing, and an auditor would perform it at the execution stage of an audit.

Many factors may affect the number of samples in substantive testing. Usually, if an auditor implements the substantive approach, he or she needs to review more samples than that of a systematic approach.

It is not the same as the tests of control. In this test, what the auditor wants to examine is the internal control that the client has designed and applied, particularly its internal control over financial reporting (Also see Difference between Financial Accounting and Management Accounting). Also known as detailed testing, the primary purpose of substantive testing is to confirm the transactions, balances, as well as the disclosures of a company’s financial statements.

The auditors should not use the result of the tests of controls to conclude whether the financial statements presented are true and fair. Its result should only conclude about the area of internal control.

Basically, the substantive testing is to verify financial assertions, such as to check the classification, completeness, occurrence, validity, to test cut-off, as well as to verify existence and authorization.

As mentioned above, auditors will perform the substantive audit procedures at the execution stage after they have gotten the audit planning ready. Then, they will perform the tests of controls so that they can understand better about the internal control of the client’s company. The next thing to do is to examine whether they may depend on internal control.

If the control is reliable, the auditors may do less work in substantive testing. However, if the auditor concluded that the control is not dependable, they may carry out the testing up to 100%.

Usually, the auditors will design their testing according to the sample they chose and confirm it with supporting documents. They need to comply with the guidance of ISA when they are selecting the samples.

The testing will not be the same as the income statement items and the balance sheet items. Typically, if there is no error in these items, the items in the statement of cash flow and the statement of change in equity should be correct too.


We may start with the substantive test of revenue. For instance, as an auditor, you have to test on a revenue cycle. To start, you have to conduct the test of controls to test all significant controls which are associated with the revenue. These testing can only verify whether the control over revenue cycle works. It does not function to confirm whether the amount, transaction and classification of revenue are right.

Now, you have conducted the tests, and you conclude that the control over revenue cycle functions well. Thus, it is time for you to consider performing substantive testing. This test is to make sure whether the revenue recorded in the income statement is correct. In revenue testing, you may verify a lot of things such the cut-off, the total amount, revenue recognition, customers confirmation and others.

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