Substantive procedures for sales revenue:

 Re-Calculate the gross profit margin and compare this to the prior year and investigate any
significant fluctuations.
 Select a sample of year end balances and agree them to their supporting documents such as
invoices or individual ledger to confirm their existence.
 Compare Hummingbird’s current year sales revenue with previous and investigate any
significant differences.
 Select last 3 GDNS of current year and first 3 GDNS of next year to ensure that they are
recorded in correct accounting period.

Substantive procedures for receivables:

 Select a sample of unpaid invoices and trace them to their receivable ledgers to ensure that
they are recorded.
 Compare current year receivables with previous year and investigate significant fluctuation.
 Select a sample of receivables and perform aged analysis on them to identify slow moving
balances.
 Select a sample of receivables from receivable ledger and agree them to their supporting
documents (invoice, GDN, etc) to ensure their existence.
 Inspect aged receivable report and identify slow moving receivable and discuss with
management why they haven’t written them off.
 Review customers correspondence to identify any balances which are in dispute or unlikely
to paid.
 Review minutes of board meeting for the evidence of factoring.

Substantive procedures for going concern:

 Discuss with management regarding going concern assumption to ensure the
appropriateness of assumption.
 Review other forecasts and budgets and perform sensitivity analysis on them.
 Review events after the period end to identify those events which affect the entity’s ability
to continue as a going concern.
 Review the terms of loan agreement and determine whether they have been breached.
 Obtain written representation from management regarding their future plans and actions
and feasibility of those plans.
 Review correspondences with major customers, suppliers and banks for the evidence of
dispute.
Substantive procedures for payables:
 Select a sample of supplier list and compare them with payable ledger to identify and
investigate missing suppliers.
 Compare current year payable balance with the previous year and investigate any significant
differences.
 Select a sample of year end payable balances and agree them to their supporting documents
to ensure their existence.
 Take last 3 GRNs of current year and first 3 GRNs of next year to ensure that they are
recorded in correct accounting period.
 Select a sample of purchased invoices and trace them to payable ledger to ensure that they
are recorded.

Substantive procedures for Cash & Bank balance:

 Obtain co’s current bank account reconciliation and check the additions to ensure the
arithmetical accuracy.
 Agree the balance per bank reconciliation to an original year-end bank statement and bank
confirmation letter.
 Agree the reconciliation balance per cash book to the year-end cash book.
 Agree the bank balance to the trial balance.
 Obtain a bank confirmation letter from the co’s bankers for all of its accounts.
 Agree all balances listed on bank confirmation letter to the bank reconciliation or trial
balance to ensure the completeness of bank balance.
 Review co’s financial statement to ensure that disclosure of cash and bank balances are
complete and accurate.
Substantive procedures during inventory count:
 Select a sample of inventory from the floor and trace them to the records to ensure that they
are recorded.
 Select a sample of inventory from records and verify their existence.
 For unsold inventory discuss with management regarding slow moving inventory to ensure
whether provision has been created.
 Review aged inventory report to identify slow moving inventory and discuss with
management why these inventory have not been written off.
 Select a sample of inventory and recalculate their purchased invoice to ensure their
arithmetical accuracy.
 Calculate the inventory days at each month and throughout the year and investigate any
significant increase or decrease.
 Obtain written representation from the management that all inventory has been recorded
correctly.
 Inspect confirmation letter from customers to ensure that they belong to client.
 Select last 3 GDNs and 3 GRNs of current year and 3 GDNs and 3 GRNs of next year to ensure
that they are recorded in correct accounting period.
 Compare current year’s inventory with previous year and investigate any significant
differences.

Substantive procedures before inventory count:

 Verify the locations of all warehouses of client to ensure that we will be able to physically
verify those entire inventories.
 Review client’s previous years report to identify problems in inventory count.
 Make sure that we have enough time and staff to perform client’s inventory count.
 Obtain from management regarding stock at third party to ensure the possibility of that
inventory count.
 Discuss with management whether any of the warehouses are new, or have experienced
significant control issues.
Substantive procedures for Non-Current Assets:
 Select a sample of non-current assets from the floor and trace them to the NCA register to
ensure that they are recorded.
 Re perform non-current asset register reconciliation to general ledger and investigate any
unusual difference.
 Select a sample of non-current assets from NCA register and agree them to physical non-
current assets to ensure their existence.
 Select a sample of disposed of assets to ensure that they are removed from records as they
no longer exist.
 Select a sample of assets and verify their purchased documents and recalculate to ensure
the arithmetical accuracy.
 Select a sample of recent purchased non-current assets to ensure that all additions were
authorised by inspecting the minutes of board meetings.
 Select a sample of disposed off assets and recalculate their profit on disposal to ensure
arithmetical accuracy.
 Select a sample of disposed off assets and verify that correct cost and depreciation has been
deducted from records.
 Discuss with management regarding their revaluation policy to ensure that they comply IAS
16 Property Plant and Equipment.
 Select a sample of re-valued asset to ensure that all similar assets have been re-valued.
 Select a sample of re-valued asset and agree them with the expert’s value to ensure that
they are correctly valued.
 Re-perform and recalculate depreciation charged to assets to ensure their valuation.
 Select a sample of current year’s depreciation charged to assets and compare with previous
year and investigate unusual differences.
 Take a sample of non-current assets and verify their ownership documents to ensure that
they are on client’s name.
 For leased assets, review lease agreement to ensure whether they are financial or operating
lease.
 Review a sample of non-current asset’s insurance to ensure that they are on client’s name.
Substantive procedures for accruals:
 Review list of accruals prepared by Client Company and check the calculations and additions
for arithmetical accuracy.
 Compare current year’s list of accruals with previous year to identify and investigate
significant differences.
 Check the amounts in the listing against the balances in the relevant main ledger expense
accounts and ensure that the amounts are same.
 Test transactions around accounting period end to determine whether they have been
recognised in correct period.

Substantive procedures for payroll:

 Cast a sample of payroll records to confirm completeness and accuracy of the payroll
expense.
 For a sample of employees, recalculate the gross and net pay and agree to the payroll record
to verify accuracy.
 Compare current year’s total payroll expense to prior year and investigate any significant
differences.
 For salaries, agree the total net pay per payroll records to the bank transfer listing of
payments and to the cashbook to ensure the arithmetical accuracy.
 Review monthly payroll charges, compare this to the prior year and budgets and discuss with
management about any significant differences.

Substantive procedures for Accounting Estimates:

 Enquire from management how the accounting estimate is made and the data on which it is
based.
 Discuss with the management regarding accounting estimates made to ensure the
reasonableness of assumptions.
 Review all accounting estimates in financial statement to determine whether they are
reasonable or misstated.
 Obtain written representation from management whether they believe that significant
assumptions used in making accounting estimates are reasonable.