Substantive analytical procedures
You'll learn how to use substantive analytical procedures to test whether balances and transactions in the financial statements are reasonable and materially stated.
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In this lesson
- 0:00 Substantive analytical procedures explained
- 1:02 How cost of sales affects gross profit margin
- 1:40 Using trade payable days to detect cut-off issues
- 2:21 Plotting sales trends to identify anomalies
- 2:42 Assessing suitability of analytical procedures
- 3:39 Investigating material differences from expectations
- 4:16 Proof in total testing methodology
- 4:42 Calculating expected wages using employee data
About this lesson
This video covers key techniques like comparing gross profit margins year-on-year, analysing trade payable days, and proof in total testing for predictable items like depreciation and wages. You'll understand how to identify when analytical procedures are suitable, how to develop reliable expectations, and what to do when results flag potential issues like cut-off errors or inventory inaccuracies. This is essential knowledge for the Audit and Assurance paper, where analytical procedures form a core part of your substantive testing strategy.
Duration: 6m
Transcript
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