Question

An auditor may perform the following three types of substantive procedures: (a) tests
of details of transactions; (b) tests of details of balances; and (c) analytical
procedures.

Below are specific audit procedures that fall within one of these categories:
1. Reconcile supplier statements at the year-end with balances in the purchase
ledger.
2. Agree a sample of sales invoices to goods despatch records held in the
inventory system.
3. Review post year-end receipts from customers to establish the extent of
unpaid debts.
4. Calculate gross profit ratios for each branch of a chain of supermarkets and
compare month by month and prior year.
5. Obtain schedule of asset disposals in the period and agree to supporting sale
documents.
6. Attend the factory on the final day of the year to review work in progress.
7. Agree payment to equipment hire company to a copy of the lease.
8. Calculate expected payroll costs from last year’s amount adjusted for staff
changes and pay rise in the year.
Required:
For each procedure, classify which of the three types it belongs to.

Answer 1

Tests of details of transaction	tests of details of balance	analytical procedure
Agree a sample of sales invoices to goods despatch records held in the inventory system.	Reconcile supplier statements at the year end with balances in the purchase ledger	Calculate gross profit ratios for each branch of a chain of supermarkets and compare month by month and prior year.
Obtain schedule of asset disposals in the period and agree to supporting sale documents.	Review post year-end receipts from customers to establish the extent of unpaid debts.	Calculate expected payroll costs from last year’s amount adjusted for staff changes and pay rise in the year.
Agree payment to equipment hire company to a copy of the lease.	Attend the factory on the final day of the year to review work in progress.