How do I ensure my substantive procedures with financial statement audit software are compliant with IFRS?

To make your substantive procedures using financial statement audit software compliant with IFRS, focus on two things:

1. Use the software to test against the correct IFRS requirements
2. Document your judgments so the audit evidence supports your conclusions

Practical steps

1. Confirm the applicable reporting framework

• Identify which standards apply: full IFRS, IFRS for SMEs, or local modifications.
• Check the entity’s reporting period, transition rules, and any new standards effective in that period.

2. Map software tests to specific IFRS assertions and disclosures

Your audit software should not just run generic analytics. It should be configured to test:

• Existence
• Completeness
• Accuracy
• Valuation/allocation
• Rights and obligations
• Presentation and disclosure

Then link each procedure to the relevant IFRS standard, for example:

• IFRS 15 for revenue recognition
• IFRS 16 for leases
• IAS 2 for inventory
• IFRS 9 for financial instruments
• IAS 16 / IAS 38 for PPE/intangibles
• IAS 36 for impairment
• IAS 12 for deferred tax
• IAS 37 for provisions and contingencies

3. Build in IFRS-specific rules and thresholds

Make sure the software uses:

• Correct recognition criteria
• Measurement basis required by IFRS
• Materiality thresholds consistent with the audit plan
• Currency conversion rules
• Cutoff dates and reporting period logic
• Any required disclosures and roll-forward schedules

4. Validate the completeness and accuracy of source data

Substantive procedures depend on reliable inputs. Before relying on software output:

• Reconcile data imports to the general ledger and trial balance
• Test population completeness
• Check for duplicates, missing records, and interface errors
• Confirm data extraction parameters
• Preserve audit trail of the data used

5. Use software outputs as audit evidence, not conclusions

The software can identify anomalies, but you still need to evaluate:

• Whether exceptions are explainable
• Whether they indicate misstatement
• Whether management’s estimates and assumptions are reasonable under IFRS
• Whether disclosures are adequate and complete

6. Document professional judgment

IFRS often requires judgment. Your workpapers should explain:

• Why a procedure is relevant
• Why a threshold is appropriate
• How exceptions were investigated
• Why a misstatement is or is not material
• Any alternative treatments considered under IFRS

7. Test presentation and disclosure, not just balances

A common compliance gap is focusing only on account balances. IFRS also requires:

• Significant accounting policy disclosures
• Judgments and estimation uncertainty
• Segment information
• Related party disclosures
• Subsequent events
• Going concern disclosures
• Fair value hierarchy disclosures
• Lease/revenue/instrument note disclosures where applicable

8. Keep software versioning and methodology controlled

To support audit quality:

• Use approved templates and scripts
• Control changes to logic, thresholds, and data filters
• Review system updates for IFRS impact
• Retain evidence of who ran the procedure, when, and with what settings

9. Review for standards that require estimates and sensitivities

For areas like:

• Impairment
• Expected credit losses
• Fair value measurements
• Provisions
• Revenue estimates
• Useful lives and residual values

Use software to compare assumptions, trends, and sensitivity analyses, but assess them against IFRS requirements and management’s basis.

10. Align with ISA, not only IFRS

Your substantive procedures also need to comply with auditing standards, especially:

• ISA 500 Audit Evidence
• ISA 520 Analytical Procedures
• ISA 530 Audit Sampling
• ISA 315 Risk Identification and Assessment
• ISA 330 Responses to Assessed Risks

IFRS determines how the financial statements should be prepared; ISA determines how you gather sufficient appropriate audit evidence.

A good compliance checklist

Before relying on the software, ask:

• Does this procedure address a relevant IFRS assertion?
• Is the population complete and accurate?
• Are the software rules consistent with the standard?
• Have I investigated exceptions properly?
• Is the conclusion supported by evidence?
• Is disclosure testing included?
• Is the workpaper clear enough for another auditor to reperform?

Example

If you use audit software to test revenue:

• Extract all sales transactions for the period
• Reconcile to the GL and shipping logs
• Flag unusual journal entries and cut-off items
• Test a sample of contracts for IFRS 15 performance obligations and timing of control transfer
• Review returns, rebates, variable consideration, and disclosures
• Document any deviations and conclusion on misstatement risk

If you want, I can give you a step-by-step IFRS compliance checklist for audit software, or tailor it to a specific area like revenue, leases, inventory, or financial instruments.