Pages
- Home
- Doa
- Timetable
- My Publication
- Expertise
- Anugerah
- Jury & Examiner
- Conferences
- Publication
- Supervision
- Services & Administration
- Community Services
- Kursus dihadiri
- Milestone
- My Readings
- Quote of the day
- Archery
- Media Coverage
- Diary
- Courses
- Kenangan & Yearbooks
- WC2022
- Movies
- Photo Folio
- Research
- Theories
- Mind Map
- Netiquette
- AI Tools
- Sejarah Dividen dan bonus ASB
- My Video
- My MBR
- Adiwangsa
- Grammar
- Panduan
- Sharing
- Memanah Duniaku
- Books (Bacaanku)
- My Diary
- My Checklist
27 Januari 2026
Who is Leonardo da Vinci?
Bagaimana Saya Mula Jatuh Cinta dengan Sukan Memanah
26 Januari 2026
20 Tahun, Sebuah Kesetiaan dan Sebuah Kesedaran
25 Januari 2026
23 Januari 2026
My "All Time Favourite" 15 Study Tips
- Push yourself - Start small. Few minutes then few hours.
- Rest! - If your tired, but don't over do it!
- Don't be perfectionist - Aim to understand, NOT to understand everything. You will understand more.
- Read! - Better start!.
- Don't ReRead! - Don't reread but test yourself. If you don't get close 100%, then reread to fill your knowledge gap.
- Set a clear goal – Know what you want to understand before you start. Reading without a goal wastes energy.
- Break it down – One topic, one concept, one problem at a time. Big tasks become easy when divided.
- Write while reading – Short notes, keywords, or diagrams lock ideas into memory.
- Teach someone (or yourself) – If you can explain it simply, you truly understand it.
- Use active recall – Close the book and list what you remember. Memory grows through effort.
- Space your learning – Come back tomorrow, next week, next month. Repetition over time beats cramming.
- Accept confusion – Feeling lost is part of learning; clarity comes later. Don’t panic.
- Connect ideas – Link new knowledge to what you already know. Learning sticks when it has anchors.
- Apply immediately – Do a question, example, or case as soon as you finish reading.
- Be consistent, not intense – 30 minutes daily beats 5 hours once a week.
21 Januari 2026
20 Januari 2026
Substantive testing
Substantive testing is audit work performed to detect material misstatements directly in the financial statements—by checking transactions, balances, and disclosures.
It answers: “Is this amount (or disclosure) actually correct?”
(Not “did the control work?”—that is TOC.)
Two main types of substantive procedures
1) Substantive analytical procedures
Auditor uses comparisons and ratios to identify unusual trends.
Example: Compare this year’s gross profit margin with last year and with industry; investigate big changes.
2) Tests of details
Auditor checks the supporting evidence for amounts.
Example: Select sales invoices and match to delivery orders and customer orders to confirm revenue is valid.
Simple examples by audit area
Cash & Bank: confirm bank balance (bank confirmation), check bank reconciliation, trace cash book to bank statement.
Receivables: send confirmation letters to customers, check subsequent receipts after year-end.
Inventory: attend stocktake, test inventory pricing and valuation, check for obsolete items.
Purchases/Payables: test supplier invoices, check unmatched GRNs, search for unrecorded liabilities.
Revenue: vouch sales to DO/invoice, perform cut-off tests (sales recorded in correct period).
When auditors do more substantive testing
Auditors increase substantive testing when:
- internal controls are weak,
- risk of material misstatement is high,
- there is significant judgment/estimation (e.g., impairment, provisions),
- fraud risk is higher.
If you tell me which topic you are studying (cash, inventory, revenue, payroll), I can write a Diploma-ready table: Assertion → Substantive test → Audit evidence.
Tests of Controls
What are Tests of Controls (TOC)?
TOC are audit procedures performed to check whether a company’s internal controls are:
- properly designed, and
- operating effectively (working consistently as intended).
If the controls are effective, the auditor may reduce some substantive testing (detailed testing of transactions/balances). If not effective, the auditor increases substantive procedures.
Simple example
Control: Every supplier payment must be approved by the Finance Manager.
TOC: The auditor selects a sample of payment vouchers and checks whether:
- the Finance Manager’s approval/signature is present,
- the approval was done before the payment date, and
- the supporting documents are attached (invoice, PO, GRN).
How auditors perform TOC (common methods)
- Inquiry: ask staff how the control is done
- Observation: watch the control being performed
- Inspection: check documents/records for evidence of the control
- Reperformance: auditor repeats the control (strong evidence)
Difference: TOC vs Substantive testing
- TOC = “Did the control work?”
- Substantive testing = “Is the account balance/transaction amount correct?”
If you tell me the topic (cash, revenue, purchases, inventory, payroll), I can give you 3–5 TOC examples specifically for that area.
Internal Control
Internal control in auditing
Internal control is a process designed and implemented by those charged with governance and management to provide reasonable assurance that the entity will:
- achieve operational objectives (effectiveness and efficiency),
- produce reliable financial reporting, and
- comply with laws and regulations.
In an audit, internal control matters because it directly affects the auditor’s assessment of the risk of material misstatement (RMM) and therefore the nature, timing, and extent of audit procedures.
1) Why auditors consider internal control
Auditors evaluate internal control not to guarantee it is perfect, but to:
- Understand how relevant controls are designed and implemented.
- Assess RMM at the financial statement level and assertion level.
- Design audit responses:
If controls are reliable and tested as effective → auditors may rely more on controls and reduce some substantive testing.
If controls are weak or not reliable → auditors increase substantive procedures (more detailed testing, larger samples, closer to year-end).
2) The 5 components of internal control (COSO framework)
Auditors commonly frame internal control using COSO:
Control Environment
“Tone at the top,” integrity and ethics, governance oversight, organizational structure, competence, HR policies.Risk Assessment
How management identifies and responds to business and reporting risks (including fraud risks, changes in systems, new products).Information and Communication
The accounting system and related business processes; how information flows and responsibilities are communicated.Control Activities
Policies/procedures that prevent or detect misstatements: approvals, reconciliations, segregation of duties, physical safeguards, IT controls.Monitoring
Ongoing or periodic evaluation of controls, internal audit activities, follow-up on identified deficiencies.
3) Types of controls auditors look at
By purpose
Preventive controls: stop errors/fraud from occurring (e.g., segregation of duties).
Detective controls: identify issues after they occur (e.g., bank reconciliations).
Corrective controls: fix problems and reduce future recurrence (e.g., root-cause action plans).
By form
- Manual controls (human review/approval)
- Automated controls (system-enforced checks)
- IT General Controls (ITGCs): access security, program change management, IT operations—these support the reliability of automated controls.
- Application controls: input–processing–output checks (validations, edit checks, sequence checks).
4) How internal control affects the audit approach
Auditors generally use a mix of:
- Tests of controls (TOC): to determine whether controls operate effectively.
- Substantive procedures: analytical procedures and tests of details to detect material misstatements directly.
Practical implications:
- High RMM / weak controls → more tests of details, larger samples, year-end testing.
- Strong controls verified by TOC → reduced extent of certain substantive tests (where appropriate), but some substantive work remains necessary for material balances.
5) How auditors obtain evidence about controls
Common techniques:
- Inquiry (ask personnel)
- Observation (watch the control being performed)
- Inspection (review documents/records)
- Reperformance (independently execute the control again—often the most persuasive)
Note: Inquiry alone is rarely sufficient to conclude a control is effective.
6) Inherent limitations of internal control
Internal control cannot provide absolute assurance due to:
- Human error
- Management override
- Collusion
- Cost–benefit constraints
- Changing conditions (new systems, staff turnover, process changes)
7) Control deficiencies and auditor communication
If issues are identified, auditors classify and communicate them (depending on standards and jurisdiction), such as:
- Deficiency in internal control
- Significant deficiency
- Material weakness (term more common in some regulatory environments)
These are often reported in a management letter (also called a letter of internal control weaknesses), with recommendations for improvement.
Examples (area → typical key controls)
- Cash/Bank → timely bank reconciliations, dual authorization for payments, restricted e-banking access.
- Revenue → approved pricing/discounts, system blocks invoicing without delivery evidence, sales-to-AR reconciliations.
- Purchases → three-way match (PO–GRN–invoice), vendor master file controls.
- Inventory → cycle counts/stocktakes, controlled warehouse access, reconciliation between stock records and GL.