Substantive Procedures
Section 3 is 30-40% of the AUD exam — the heaviest section — and substantive procedures are its backbone. The #1 AICPA trap is confusing the direction of testing: vouching tests existence while tracing tests completeness, and candidates routinely reverse them. Under AU-C 330, the auditor must design substantive procedures that are specifically responsive to assessed risks, and for significant risks like revenue recognition, substantive analytical procedures alone are never sufficient. Many candidates also miss that AU-C 505 requires direct communication with third parties for external confirmations, not routing through the client.
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What AICPA Wants You to Know
- 1Distinguish between tests of details and substantive analytical procedures
- 2Match substantive procedures to financial statement assertions
- 3Understand when substantive procedures are required for significant risks
- 4Explain the five management assertions for account balances, transactions, and disclosures
- 5Apply substantive procedures to key balance sheet and income statement accounts