Para 2.1.24 — MSO

2.1.24 Various steps involved in performing direct substantive testing are as follows:

(i) Identification of the sub-system to be tested. For example, while auditing the Transport Department, one of the sub-systems could be purchases.

(ii) Identification of the sub-audit objective to be tested for the selected subsystem. For example, the sub-audit objectives could be to check whether ‘the transactions are accurately reflected in the accounts’ or ‘all purchases are completely accounted for in the records’.

(iii) Identification of the technique for gathering evidence. Continuing with the earlier example, to test the sub-audit objective of whether the transactions are accurately reflected, the auditor may re-perform the calculations in the purchase vouchers. However, in order to test whether all the purchase transactions have been accounted for, the auditor may reconcile the purchase book with the invoices received from the suppliers or with the suppliers’ ledger.

(iv) Determination of the sample size and performance of a test check using the identified technique for evidence gathering.

(v) Formulation of conclusions on the fulfilment or otherwise of the sub-audit objective for the selected sub-system.