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The three types of substantive tests are analytical procedures, a test of details of transactions, and tests of details of balances.
02 Analytical procedures are an important part of the audit process and consist of evaluations of financial information made by a study of plausible re- lationships among both financial and nonfinancial data.
Examples of analytical tests include:
Use of substantive analytical procedures
Three types of analytical procedures commonly used by auditors are trend analysis, ratio analysis and reasonableness testing. a significant difference or threshold The auditor needs to determine a threshold that can be accepted without further investigation.
For different stages of business analytics huge amount of data is processed at various steps. Depending on the stage of the workflow and the requirement of data analysis, there are four main kinds of analytics – descriptive, diagnostic, predictive and prescriptive.
06 The purpose of applying analytical procedures in planning the audit is to assist in planning the nature, timing, and extent of auditing procedures that will be used to obtain audit evidence for specific account balances or classes of transactions.
A reasonableness test is an auditing procedure that examines the validity of accounting information. For example, an auditor could compare a reported ending inventory balance to the amount of storage space in a company’s warehouse, to see if the reported amount of inventory could fit in there.
To be reasonable means to be as much as is appropriate or fair. In math, reasonableness can be defined as checking to verify that the result of the solution or the calculation of the problem is correct or not, be either estimating or by plugging in your result to check it.
The “reasonable person” is a hypothetical individual who approaches any situation with the appropriate amount of caution and then sensibly takes action. It is a standard created to provide courts and juries with an objective test that can be used in deciding whether a person’s actions constitute negligence.
You can‘t exclude liability for death or personal injury caused by your negligence. 3. You can only exclude liability for other losses caused by your negligence, if reasonable.
The starting point for the ‘reasonableness‘ test is s11(1), which looks at the circumstances that were (or ought reasonably to have been) known, or in the contemplation of the parties, at the time the contract was entered into.