Chartered Professional Accountant (CPA) Core 1 Practice Exam

Substantive procedures are evidence-gathering activities aimed at detecting material misstatements at the assertion level. They come in two main forms: tests of details, which examine individual transactions, balances, and disclosures to verify accuracy, and substantive analytical procedures, which assess financial information by analyzing plausible relationships and trends, such as comparing ratios or margins over time. Because substantive procedures are about directly detecting misstatements, both tests of details and substantive analytical procedures fall under this category. Tests of controls, by contrast, focus on evaluating the design and operating effectiveness of a client’s internal controls and influence how much substantive testing is needed, but are not themselves substantive procedures. Therefore, the combination of tests of details and substantive analytical procedures best identifies substantive procedures.