Approach

Question 1

Types of approaches

Answer 1

1) Substantive (purely substantive)
2) combined (substantive and tests of controls)

Question 2

Substantive procedures

Answer 2

• at assertion level to detect MM, which include: test of details (account balances) and analytical procedures

Question 3

Test of controls

Answer 3

• evaluate operating effectiveness of controls in preventing, detecting or correcting MM at assertion level

Question 4

Substantive approach

Answer 4

• used when no reliance on effectiveness of controls can be had
• this is when control risk is high

Question 5

Combined approach

Answer 5

• used when control risk is low and the effectiveness of controls can be relied on
• also used when substantive procedures alone do not provide enough evidence (when so many transactions of low value limited the ability to perform tests of details)

Question 6

Other considerations to approach

Answer 6

• if part of a group of companies you must obtain understanding of the whole group
• where many locations being audited may need to engage component audit teams within audit group for each location