Answer to Question #209658 in Accounting for Shang

Question

Discuss briefly the common and differences of audit substantives test objectives of the accounts in the financial statements.

Answer 1

Substantive testing is an audit procedure that examines the financial statements and supporting documentation to see if they contain errors. These tests are needed as evidence to support the assertion that the financial records of an entity are complete, valid, and accurate.

The following list is a sampling of the available tests:

• Issue a bank confirmation to test ending cash balances,
• Contact customers to confirm that accounts receivable balances are correct,
• Observe the period-end physical inventory count,
• Confirm the validity of inventory valuation calculations,
• Confirm with experts that the fair values assigned to assets obtained through a business combination are reasonable.