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Substantive procedures (or substantive tests) are those activities performed by the auditor to detect material misstatement at the assertion level. [1]Management implicitly assert that account balances and disclosures and underlying classes of transactions do not contain any material misstatements: in other words, that they are materially complete, valid and accurate.
It serves to guide the auditor on obtaining audit evidence through the application of an appropriate mix of tests of control systems and substantive tests of transaction and balances. It requests the auditor to obtain 'sufficient' and 'appropriate' audit evidence in order to draw reasonable conclusions on which to base the audit opinion.
Quality control separates the act of testing products to uncover defects from the decision to allow or deny product release, which may be determined by fiscal constraints. [6] For contract work, particularly work awarded by government agencies, quality control issues are among the top reasons for not renewing a contract.
Like the test of control in the preceding paragraph, this test satisfies the accuracy transaction-related audit objective for sales. For the sake of efficiency, auditors often perform tests of controls and substantive tests of transactions at the same time. Assess Likelihood of Misstatement in Financial Statement. Notes:
Control is a function of management that helps to check errors and take corrective actions. This is done to minimize deviation from standards and ensure that the stated goals of the organization are achieved in a desired manner.
Nelson rules are a method in process control of determining whether some measured variable is out of control (unpredictable versus consistent). Rules for detecting "out-of-control" or non-random conditions were first postulated by Walter A. Shewhart [1] in the 1920s.
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A control chart is a more specific kind of run chart. The control chart is one of the seven basic tools of quality control, which also include the histogram, pareto chart, check sheet, cause and effect diagram, flowchart and scatter diagram. Control charts prevent unnecessary process adjustments, provide information about process capability ...