Tianlong Audit Methodology
The Ultimate Guide to Auditing
Topics for specific circumstances
This chapter describes primary substantive procedures (PSPs), including executable PSPs (ePSPs) and sector PSPs, and the related guidance.
PSPs, including any applicable sector PSPs, are required on all audits for relevant assertions of significant accounts and disclosures, regardless of the combined risk assessment (CRA). PSPs are required because:
- Our identification and assessment of risks requires user of judgment, and may not reflect every risk of material misstatement
- There are inherent limitations to controls, including management override
PSPs provide the minimum level of substantive audit evidence we expect to obtain for relevant assertions of significant accounts and disclosures and describe the nature of the audit procedure to be performed.
We customize the nature, timing and extent of PSPs for each audit, depending on the relevance and reliability of the audit evidence we expect to obtain, and in response to the Combined Risk Assessment (CRA).
As an alternative to PSPs, audit teams may use ePSPs which provide much of the necessary customization for each PSP. However, because the ePSPs do not assume a specific CRA, the nature, timing and extent of the procedure may need to be further customized.
In addition to PSPs, we design the nature, timing and extent of other substantive procedures (OSPs) to respond to the CRA for each relevant assertion for significant accounts and disclosures when we have not obtained sufficient audit evidence from the PSPs alone.
This topic is organized into the following sections:
- Standard accounts
- Specific sector
Includes PSPs and guidance that are applicable to all industries and financial reporting frameworks and are based on a standardized set of significant accounts. The significant accounts use a standard naming convention and a working paper index (e.g., D: Cash and short-term deposits). ePSPs are also available for certain standard accounts.
Includes sector PSPs and guidance that are required for audit engagements in certain sectors. Depending on the sector, the sectors PSPs may be relevant to a standard significant accounts and/or sector-specific significant accounts. Sector PSPs are required in addition to PSPs that are applicable to all industries and financial reporting frameworks.
The account-specific guidance may help us apply PSPs or design appropriate OSPs. The guidance available includes:
- Nature, assertions and audit considerations –factors to consider when applying PSPs and designing OSPs for the account (available only for standard accounts).
- Illustrative inherent risk factors – factors that may increase the risk of material misstatement for these accounts or disclosures and result in a ‘higher’ inherent risk for the relevant assertion(s). When the opposite situation exists, we may assess the risk of material misstatement for the account or disclosure as less likely to occur, resulting in a ‘lower’ inherent risk for the relevant assertion(s).
- PSP application guidance – provides guidance on designing and executing each PSP applicable to the account (available only for standard accounts).
- Illustrative OSPs – after exercising professional judgment and considering our CRA, we determine whether OSPs are needed to address the risk of material misstatement at the assertion level for significant accounts and disclosures. Illustrative OSPs are not all-inclusive and should not be used as checklists. In addition, not all illustrative OSPs are applicable on each audit.
- Illustrative substantive procedures related to execution of PSPs – clarifies how certain PSPs are generally executed. For convenience, these illustrative substantive procedures have been referenced to the applicable PSP (available only for sector-specific accounts).
Topics under chapter 5: Topics for Specific Circumstances
Browse All Chapters:
Request a free trial
You will get a month’s worth of bookkeeping. Whether or not you continue with us, your reports for the month are yours to keep.