The audit process begins with planning, during which the auditor develops an overall audit strategy and audit plan. This involves obtaining an understanding of the entity and its environment, assessing risks of material misstatement, determining materiality, and designing appropriate audit procedures to obtain sufficient and appropriate audit evidence.

The auditor performs risk assessment procedures to identify and assess risks at the financial statement and assertion levels. Based on the assessed risks, the auditor designs further audit procedures, which may include tests of controls and substantive procedures.

Substantive procedures are audit procedures designed to detect material misstatements at the assertion level and provide evidence regarding the accuracy, completeness, existence, occurrence, valuation, rights and obligations, and presentation of financial statement items. Substantive procedures consist of:

• Tests of details – procedures performed on transactions, account balances, and disclosures to obtain evidence supporting the amounts reported in the financial statements. These may include inspection of supporting documents, external confirmations, recalculations, and reperformance of procedures.

• Substantive analytical procedures – evaluations of financial information through analysis of plausible relationships between financial and non-financial data. The auditor investigates significant or unexpected fluctuations, such as comparing current year finance costs with prior year amounts and assessing whether movements are reasonable.

Tests of controls are performed to evaluate whether internal controls are operating effectively in preventing or detecting material misstatements. Where the auditor intends to rely on effective controls, successful testing of those controls may allow the auditor to reduce the extent of substantive procedures. However, substantive procedures remain necessary for material balances, transactions, and disclosures.

The results of these procedures enable the auditor to obtain sufficient appropriate audit evidence and form an opinion on whether the financial statements are prepared, in all material respects, in accordance with the applicable financial reporting framework.