SUBSTANTIVE PROCEDURES FOR INVENTORY:

1. Physically inspect the inventory in warehouse and compare the floor inventory to count sheet
inventory to verify completeness.
2. Review the documents like purchase invoices to to verify the ownership.
3. Obtain a confirmation letter from third party if inventory is held at a third party location.
4. If inventory is in Transit, review the purchase agreement to confirm when risks and rewards are
transferred.
5. Obtain the breakdown of inventory valuation to ensure that material, labour and overheads are
correctly stated.
6. Re calculate the total amount to ensure valuation.
7. Review the aged inventory report to identify any slow moving inventory.
8. Ask for the sample of pre and post year-end GRN’s and GDN’s to ensure they are recording in
correct accounting period.
9. Calculate the inventory turnover period, compare it with last year and investigate the unusual
fluctuations.
10. Get a written representation from the management that inventory has been correctly valued.
11. Consider the need of an expert to ensure the valuation of working in progress inventory.

SUBSTANTIVE PROCEDURE FOR PROPERTY PLANT AND EQUIPMENT:

1. Physically visit the property purchased to verify existence.

2. Inspect the legal transfer deed and see the name of company to verify ownership.
3. Inspect the NCA register to ensure that the property purchased added in it to confirm the
completeness of records.
4. Agree the amount paid against the purchased property in the bank statement.
5. Discuss with the management about the basis of life increase of machine to ascertain
assumptions are reliable.
6. Recalculate the NCA register to verify the mathematical accuracy of figures.
7. Review lease agreements for a sample of leased assets to confirm their rights and obligations.
8. Inspect and read the notes to the accounts to ensure complete disclosure of PPE as per IAS-16.

SUBSTANTIVE PROCEDURES FOR REVALUATION:

1. Inspect the valuation report prepared by expert to agree the amount of revaluation.
2. Evaluate the competence, reputation and objectivity of an expert to ascertain the assumptions
used in revaluation were reliable.
3. Agree the revaluation amount as increase in NCA register, also increase in revaluation surplus.
4. Inspect the NCA register and equity movement records to ensure same class of properties were
revalued.
5. Inspect the equity movement records to ensure excess depreciation due to revaluation is settled
in equity.
6. Re calculate the surplus/ deficit on revaluation to confirm arithmetical accuracy.
7. Review and read the notes to the accounts to ensure complete disclosure of revaluation as per
IAS-16.
SUSBTANTIVE PROCEDURES FOR ADDITIONS & DIPOSALS OF PPE:
1. Obtain the breakdown of schedule and cast the schedule that it agrees with Non-current assets
register.
2. Physically visit the property purchased to verify existence.
3. Obtain the purchase invoice of PPE to verify the ownership.
4. Inspect the NCA register to verify that the machine purchased have been added in it.
5. Review the NCA register to confirm disposals are removed.
6. Review the minutes of meeting to ensure additions/disposals authorized by TCWG.
7. Recalculate the gain or loss on disposal to confirm arithmetical accuracy.

SUSBTANTIVE PROCEDURES FOR DEPRECIATION:

1. Enquire from management and obtain a written representation of depreciation policy to ensure
it is line with IAS-16..
2. To assess the reasonableness of estimates compare it to industry averages.
3. Recalculate the depreciation charge to confirm arithmetical accuracy.
4. To check the consistency of depreciation policy compare it with last year.
5. Reads the notes to the financial statements to ensure the adequacy of disclosure is as per IAS-
16.

SUSBTANTIVE PROCEDURES FOR CASH & BANK:

1. Obtain a breakdown schedule of bank balances and cast the schedule to check its accuracy.
2. Perform a cash count at year-end in the presence of custodian to verify existence and valuation.
3. Recalculate the cash day book, ledgers to verify mathematical accuracy of figures.
4. Agree the opening cash balance from the last year closing balance to ensure correct amount is
carried down.
5. Compare the total cash balances with the prior year balance and investigate the significant
differences.
6. Obtain a bank confirmation letter directly from the bank to verify the existence of all accounts.
7. Review cashbook and bank statement for any unusual items.
8. Review financial statement to ensure disclosure of cash and all bank accounts are completely
accurate.

SUSBTANTIVE PROCEDURES FOR BANK RECONCILIATION:

1. Re perform a sample of reconciliation statement to confirm their accuracy.
2. Agree the year-end bank balance as per the bank statement to the balance confirmed by the
bank through a direct bank confirmation.
3. Verify the balance as per cashbook with the general ledger to confirm accuracy.
4. Trace a sample of outstanding lodgments into the post year-end bank statement to confirm
completeness.
 5. Verify the bank charges from year-end bank statement.
6. Trace a sample of unpresented cheques into the post year-end bank statement to confirm
completeness.

SUSBTANTIVE PROCEDURES FOR BONUSES:

1. Review the minutes of meeting of remuneration committee to confirm the basis of bonus.
2. Obtain the management’s working of bonus calculation and recalculate to verify mathematical
accuracy of figures.
3. Obtain the payroll records and agree the amount of bonus, also agree as expenses in profit and
loss.
4. Inspect the liability schedule to ensure the amount of bonus is accrued as current liability
5. Agree the amount of bonuses paid to directors in the post year-end bank statement
6. Review the adequacy of disclosure of director bonuses in the notes as per relevant accounting
standard.

SUSBTANTIVE PROCEDURES FOR INTANGIBLE ASSET (RESEARCH & DEVELOPMENT):

1. Obtain a breakdown schedule of intangible asset and cast it for accuracy.
2. Ask for the sample of invoices and assess the nature of transactions of expenses to ensure
classification.
3. Review the forecast to confirm the probability of economic benefits related to development
expenditure.
4. Inspect the expert reports to confirm that development is technically feasible.
5. Recalculate the amortization calculation.
6. Enquire from the management and obtain a written representation of basis for useful life.
7. To assess the reasonableness of useful life compare it with industry average.
8. Review notes to the financial statements that disclosure is in line with IAS-38.

SUSBTANTIVE PROCEDURES FOR PATENTS:

1. Inspect the legal documents to verify the cost of patent.
2. Inspect registration certificates to confirm the entity has ownership rights to the patent.
3. Review the legal documentation to ensure rights and obligation.
4. Recalculate the amortization calculation to ensure accuracy.
5. Reviewing the useful life of the patent to assess reasonableness.
6. Review notes to the financial statements that disclosure is in line with IAS-38.

SUSBTANTIVE PROCEDURES FOR RECEIVABLES:

1. Obtain a breakdown of receivables and cast it for accuracy and compare it with general ledger,
trial balance and financial statements.
2. Agree the opening receivables from the last year closing balance to ensure correct amount is
carried down.
 3. Compare the total receivables with prior years and industry avareages and investigate the
significant differences.
4. Calculate the receivables collection period, compare it with prior year and investigate the
unusual variations.
5. For any slow moving receivables review the aged receivables ledger and discuss with the credit
controller.
6. Review the post year-end cash balances with the year-end receivables to ensure correct value is
reported.
7. Review the post year-end credit notes and ensure this is not included in the year-end
receivables balance.
8. Perform a positive circularization for sample of receivables.
9. For any receivables sold to factoring organization, review the agreement with the factoring
organization and the minutes of board meeting to confirms no rights over the receivables.
10. Review the adequacy of disclosure in the notes to the financial statement related to the
receivables at the year-end.

SUSBTANTIVE PROCEDURES FOR share capital:

1. Agree the authorized share capital with authorized documents governing the company’s
constitution.
2. Inspect the minutes of board meeting to ensure authorization of share issues.
3. Re perform the calculation of share capital and premium to verify the accuracy of figures.
4. Inspect the equity record and agrees the share value at par and the excess amount is included in
share premium to ensure classification.
5. Inspect the share register and sample of share certificates to confirm existence and ownership
of shares issued.
6. Review the adequacy of disclosure in the notes to the financial statement to ensure compliance
with relevant accounting standard.

SUBSTANTIVE PROCEDURES FOR ANY TYPE OF PROVISION:

1. Review board minutes to identify any discussion or approval related to provision to confirm the
existence.
2. Recalculate the provision amount to ensure accuracy.
3. Inspect the supporting documents to verify the basis and reasonableness of the provision.
4. Compare the current year provision with the prior year and investigate the significant variation.
5. Obtain a written representation from management to confirm the completeness and
reasonableness of the provision.
6. Review the adequacy of disclosure in the notes to the financial statement to ensure compliance
with relevant accounting standard.

SUSBSTANTIVE PROCEDURES FOR REVENUE:

1. Obtain a breakdown of sales and cast it for accuracy
2. Obtain a sample of invoices and to verify the sales were genuinely occurred in the period.
 3. Compare the amount with the prior year and investigate the significant difference.
4. Calculate the G.P MARGIN, compare it with prior year and industry average and investigate the
significant variation.
5. Perform a proof-in-total calculation, obtaining the total units sold, multiply with average selling
price, compare it with reported figure and investigate the unusual difference.
6. Select a sample of customer’s orders and agrees these to dispatch notes and sales invoices to
ensure completeness of revenue.
7. Select a sample of credit notes and trace through original invoices to ensure returns are
recorded in correct accounting period.

SUBSTANTIVE PROCEDURE FOR DIRECTOR’s EMOLUMENT:

1. Obtain a breakup schedule of director’s emolument, cast it for accuracy and compare it with
G/L, TB and FS.
2. Agree the individual bonus payments to the payroll records.
3. Review the board minutes to confirm any additional bonus payment relating to this year has
been agreed.
4. Obtain a written representation from management, confirming the completeness of director’s
emolument including the bonus.
5. Compare the director bonus with last year budget and investigate the unusual variation.
6. Trace amounts paid to directors from payroll records to bank statements to confirm actual
payment.
7. Review the adequacy of disclosure in the notes to the financial statements to ensure it complies
with legislation/ relevant accounting standard.

SUBSTANTIVE PROCEDURES for PAYROLL:

1. Obtain a breakup of payroll expenses and cast it for accuracy.
2. Compare the total payroll expenses with prior year and investigate the significant
difference.
3. Compare the monthly payroll expenses with previous months and investigate the unusual
variations.
4. Perform proof in total calculations by multiplying the total numbers of employees with
average pay rate, compare it with reported figures and investigate the significant variances.
5. Match payroll expenses with the general ledger to ensure completeness.
6. Obtain a written representation from management confirming that there are no unrecorded
payroll liabilities.

SUBSTANTIVE PROCEDURE FOR LOAN:

1. Obtain a bank confirmation letter to confirm the year-end loan balance.
2. Obtain a written representation from bank to confirm the number of loans taken during the
year.
3. Re-calculate the finance cost to confirm the amount reported in financial statement.
4. Recalculate the split of loan between current and non-current liability from the loan schedule
and agree to the financial statement.
5. Inspect the loan agreement to identify any covenants.
 6. Review notes to the financial statement to ensure disclosures comply with relevant accounting
standard

SUBSTANTIVE PROCEDURE FOR PAYABLES:

1. Obtain a breakup schedule for payables, cast it for accuracy and compare it with ledger, trial
balance and financial statement.
2. Compare the total payables balance and as well as individual supplier balances with the
prior year balance and investigate the significant difference.
3. Calculate the payables payment period, compare it with prior year and industry average and
investigate the significant fluctuations.
4. Compare the current year supplier list to identify new or missing suppliers and investigate
the reasons.
5. Select a sample of GRN and compare it with purchase invoices to ensure payables are
recorded in correct period.
6. Review the post year-end payments to ensure payables balance at the end are was
accurate.
7. Check the audit trail from source documents to ledger to trace the transaction and confirm
completeness.
8. Reconcile purchase ledger control account to purchase ledger of balances to ensure
accuracy.

SUBSTANTIVE PROCEDURES FOR Year-end accrual for income Tax-payable/ sale tax liability/

accrual for employment tax payable:

1. Compare accrual for income tax payable of current year with last year and investigate
differences.
2. Re-perform the calculation of accrual for income tax payable to ensure arithmetic accuracy.
3. Review adequacy of disclosures of accrual to ensure they are in accordance with legislation.
4. Review subsequent payments to post year cash book and bank statement.
5. Ensure reasonableness accrual for income tax payable made.
6. Review any correspondence with tax authorities to asses if any payments are due, as they
have to be included in accruals.
7. Ensure accruals are pertain to nature of business.

SUBSTANTIVE PROCEDURES FOR Potential breach/legal claim/lawsuit/ court case:

1. Review adequacy of disclosure to /ensure the provision is made in accordance with

applicable financial reporting framework.
2. Obtain written representation from management confirming their view of claim and
whether provision is required or not.
3. Review board minutes to understand whether directors believe the claim to be successful or
not.
4. Recalculate the total amount of breach to ensure arithmetic accuracy.
5. Obtain lawyer confirmation to obtain their view as to the probability of claim being
successful.
6. Discuss with the management nature of issue, to ensure legal claim exist or not.

SUBSTANTIVE PROCEDURE FOR Payroll fraud:

1. Review board minutes for management discussions evidence on payroll fraud.
2. Discuss with payroll management nature of fraud, how it occurs and its impact.
3. Review and test internal controls surrounding the payroll area to assess whether
fraud may have occurred.
4. Discuss with the management as to whether they are aware of any potential frauds.
5. Obtain a written representation from management acknowledging they have
disclosed to auditor about all knowledge of actual and suspected fraud.