Audit and Assurance Practice Exam 2025 – The Complete All-in-One Guide for Exam Success!

Substantive testing is primarily concerned with verifying the accuracy of transactions and balances in the financial statements. This type of testing involves various procedures that allow auditors to gather evidence regarding the completeness, accuracy, and validity of the information presented in the financial records.

When auditors perform substantive tests, they directly verify amounts recorded in the financial statements by examining supporting documentation, such as invoices, bank statements, and contracts. This testing is crucial as it helps to ensure that the financial statements are free from material misstatement, either due to error or fraud.

The focus on transactional accuracy means that substantive tests can include techniques such as confirmation of balances, recalculating figures, selecting samples of transactions for detailed testing, and analytical procedures that compare recorded figures to expected values or trends. Consequently, the outcome of these tests provides an essential basis for the auditor's opinion on the financial statements.