ACCA Advanced Audit and Assurance (AAA) Practice Exam

Which procedure is NOT part of substantive procedures when drawing up an audit plan?

1. Review general ledger for unusual records

2. Carry out analytical review

3. Conducting future forecasts

4. Test balances in detail

The correct answer is: Conducting future forecasts

In the context of an audit plan, substantive procedures are designed to detect material misstatements at the assertion level. These procedures typically involve detailed testing of transactions and balances to obtain evidence regarding the accuracy and completeness of financial statements. The procedure involving conducting future forecasts does not fit into the category of substantive procedures. Substantive procedures focus on historical financial data to verify reported figures, while future forecasts are more aligned with predictive analytics and strategic planning, rather than the examination of past transactions or balances. The primary goal of an audit is to provide assurance on the accuracy of the financial statements as of a specific reporting date, which is not achieved through forecasts. Reviewing the general ledger for unusual records, carrying out analytical reviews, and testing balances in detail are all integral parts of substantive procedures. They aim to ensure that the financial statements are free from material misstatement, supporting auditors in forming an opinion on the financial statements' fairness and accuracy.