Start with assertions that drive evidence quality

Substantive testing should not be a checklist of “pick a sample and inspect.” It is a decision process that links each key account and assertion to the most informative evidence you can obtain.

A useful way to design the plan is to map what could go wrong (the assertion) to what proof would resolve it (the procedure). When evidence is selected for the right assertion, the work becomes more defensible and less redundant.

Revenue: balance what you test across occurrence, completeness, and cut-off

Revenue misstatements often come from early or late recognition, incomplete recording, or sales that do not meet recognition criteria. Your procedures should therefore emphasize occurrence, completeness, and cut-off, while still addressing valuation and presentation as needed.

Occurrence

  • Trace selected posted sales to shipping documents, contracts, and customer acceptance terms.
  • Verify that the timing aligns with policy and that the customer-side evidence supports the recognition date.
  • Confirm that key contract terms required for revenue recognition are present and consistent.

Completeness

  • Trace selected shipping and cash receipts to the general ledger and subledger records.
  • Compare recorded revenue to source documents for completeness indicators, especially for high-volume channels.
  • Perform analytical review on unusual patterns around returns, discounts, and payment terms.
Cut-off design tip

For cut-off, define the window using the entity’s process timeline (order approval, fulfillment, billing, and posting). Then test both directions: look forward for late postings and backward for early recognition.

Expenses: focus on existence, completeness, and correct period

Expense accounts frequently include accruals, provisions, and liabilities for services not yet invoiced. That makes completeness, occurrence, and cut-off especially important.

Common expense assertions to operationalize

  1. Existence/occurrence: Select expense entries and trace to approved vendor documentation, service confirmation, or receiving records.
  2. Completeness: Review receiving logs, vendor statements, and unbilled service indicators, then reconcile to accrued and recorded amounts.
  3. Cut-off: Compare dates across purchase order approval, receiving, and ledger posting to ensure services are recorded in the proper period.
  4. Valuation: Check allocation keys, freight handling, and reasonableness of estimates for significant judgments.

When estimates drive expense balances, design evidence that tests the mechanics (how the estimate was calculated) and the inputs (how amounts were derived). Avoid designing procedures that only confirm the output amount.

Cash: tailor procedures to rights, completeness, and bank reconciliation integrity

Cash balances are sensitive to timing, restricted funds, and reconciliation errors. Even when balances appear stable, the assertion risk often sits in existence, rights and obligations, and completeness (unrecorded cash movements).

Rights and obligations

  • Identify restricted cash and confirm classification based on supporting agreements.
  • Review bank account ownership, authorized signers, and any covenants affecting use.
  • Verify that bank accounts included in cash totals match the population used for reporting.

Completeness and reconciliation integrity

  • Inspect reconciling items for aging, nature, and resolution evidence.
  • Test reconciling items by tracing to subsequent bank statements and ledger activity.
  • Reperform key reconciliation steps for a sample of periods and accounts.

A strong cash plan usually includes both: (1) external corroboration (bank evidence) and (2) internal completeness checks that connect cash movements to ledger recordings.

Connect procedures to sampling decisions and evidence sufficiency

Once each procedure is aligned to an assertion, the remaining challenge is determining what sample sizes, selection methods, and evidence strength you need. Tie decisions to:

  • Risk: higher risk assertions require stronger evidence or more targeted selection.
  • Population characteristics: batch, volume, and exception patterns affect how you select items.
  • Misstatement tolerable: estimate potential impact on the financial statements and adjust evidence accordingly.
  • Evidence independence: avoid relying on the same internal source documents to support multiple assertions.

Good planning ends with a clear conclusion path: for each key assertion, you should be able to explain how your evidence would confirm or refute the risk of misstatement.

Checklist you can convert into workpapers

Assertion-to-procedure link
Every procedure explicitly addresses one or more key assertions.
Source documents matched to risk
Evidence is drawn from the process steps that create the misstatement risk.
Cut-off window defined
Testing windows reflect entity timing, not just calendar dates.
Reconciliation items examined
Cash reconciling items are inspected and supported by subsequent evidence.
Sampling rationale documented
Population, selection method, and evidence strength are consistent with risk.
Conclusion path recorded
Each assertion has a clear reasoning route from evidence to outcome.