Substantive testing is a type of audit procedure that auditors perform to detect material misstatements in the financial statements. The purpose of substantive testing is to provide evidence to the auditors about the completeness, accuracy, and occurrence of transactions in the financial statements.

There are two main types of substantive tests:

1. Tests of details: These tests are performed to verify the accuracy of specific transactions. For example, an auditor may select a sample of sales transactions and verify that they have been recorded correctly in the sales ledger.

2. Analytical procedures: These tests involve the analysis of significant ratios and trends, and the investigation of any unusual fluctuations or items. For example, an auditor may analyze the trend of a company's gross profit margin over time. If there is a significant change in the margin, the auditor may investigate further to determine the cause of the change.

In summary, substantive testing is a crucial part of the audit process, as it provides the auditors with evidence about the validity of the transactions recorded in the financial statements.

Question

Substantive testing is a type of audit procedure that auditors perform to detect material misstatements in the financial statements. The purpose of substantive testing is to provide evidence to the auditors about the completeness, accuracy, and occurrence of transactions in the financial statements.

There are two main types of substantive tests:

1. Tests of details: These tests are performed to verify the accuracy of specific transactions. For example, an auditor may select a sample of sales transactions and verify that they have been recorded correctly in the sales ledger.

2. Analytical procedures: These tests involve the analysis of significant ratios and trends, and the investigation of any unusual fluctuations or items. For example, an auditor may analyze the trend of a company's gross profit margin over time. If there is a significant change in the margin, the auditor may investigate further to determine the cause of the change.

In summary, substantive testing is a crucial part of the audit process, as it provides the auditors with evidence about the validity of the transactions recorded in the financial statements.

Knowee AI · Accepted Answer

Substantive testing is a type of audit procedure that auditors perform to detect material misstatements in the financial statements. The purpose of substantive testing is to provide evidence to the auditors about the completeness, accuracy, and occurrence of transactions in the financial statements.

There are two main types of substantive tests:

1. Tests of details: These tests are performed to verify the accuracy of specific transactions. For example, an auditor may select a sample of sales transactions and verify that they have been recorded correctly in the sales ledger.

2. Analytical procedures: These tests involve the analysis of significant ratios and trends, and the investigation of any unusual fluctuations or items. For example, an auditor may analyze the trend of a company's gross profit margin over time. If there is a significant change in the margin, the auditor may investigate further to determine the cause of the change.

In summary, substantive testing is a crucial part of the audit process, as it provides the auditors with evidence about the validity of the transactions recorded in the financial statements.

Explain the purpose of substantive testing and give examples of the maintypes of substantive tests.

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Explain the purpose of substantive testing and give examples of the main types of substantive tests.

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