Syllabus D. Audit Evidence D2. Audit procedures

D2e. Control v Substantive Tests 5 / 5

MC Question 8 -

Which of the following is a substantive audit procedure for wages and salaries?

A. Inspect a sample of clock cards for evidence of authorisation by a responsible official
B. Recalculate a sample of payroll deductions such as employment taxes to confirm accuracy
C. Attempt to access and make changes to the payroll master file using the log on for a junior clerk

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Question 2a - Specimen

Auditors are required to obtain sufficient appropriate audit evidence. Tests of control and substantive procedures can be used to obtain such evidence.

Define a ‘test of control’ and a ‘substantive procedure’. (2 marks)

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Question 1d i -

DinZee Co assembles fridges, microwaves, washing machines and other similar domestic appliances from parts procured from a large number of suppliers. As part of the interim audit work two weeks prior to the company year-end, you are testing the procurement and purchases systems and attending the inventory count.

Procurement and purchases system

Parts inventory is monitored by the stores manager. When the quantity of a particular part falls below re-order level, an e-mail is sent to the procurement department detailing the part required and the quantity to order. A copy of the e-mail is filed on the store manager’s computer.

Staff in the procurement department check the e-mail, allocate the order to an authorised supplier and send the order to that supplier using Electronic Data Interchange (EDI). A copy of the EDI order is filed in the order database by the computer system. The order is identified by a unique order number.

When goods are received at DinZee, the stores clerk confirms that the inventory agrees to the delivery note and checks the order database to ensure that the inventory were in fact ordered by DinZee. (Delivery is refused where goods do not have a delivery note.)

The order in the order database is updated to confirm receipt of goods, and the perpetual inventory system updated to show the receipt of inventory. The physical goods are added to the parts store and the paper delivery note is stamped with the order number and is filed in the goods inwards department.

The supplier sends a purchase invoice to DinZee using EDI; invoices are automatically routed to the accounts department. On receipt of the invoice, the accounts clerk checks the order database, matches the invoice details with the database and updates the database to confirm receipt of invoice. The invoice is added to the purchases database, where the purchase day book (PDB) and suppliers individual account in the payables ledger are automatically updated.


State the aim of a test of control and the aim of a substantive procedure.

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