Question

Explain in your own words why tests of compliance with laws and regulations are considered to be substantive tests. Are there any other test that may be considered?

Answer 1

Substantive tests are the audit tests to examine the accuracy of financial statements. The objective of these tests to determine whether financial statements are complete, free from errors and are not biased.

Management must be complied with applicable laws and regualations. Financial statements must be prepared after considering the same. And auditor has be identify there must not be any material misstatement from due to non compliance of laws and regulation. Auditor has to obtain sufficient and appropriate audit evidences to support the same.

Testing of compliance with laws and regulations requires evidence to support. Thats' why we considered it as a substantive tests.

Other substantive tests:

a) Stock audit report

b) Confirmation from creditors

c) Bank statement and confirmation

d) Matching of purchase order to Goods receipt note to vendor invoice

e) Matching of sales order to invoice billed.