Question

Steve is auditing Black Widow Inc. In reviewing the sales ledger, Steve saw that Black Widow had sold 5,000 grappling hooks to Hawkeye Ltd. Steve reviewed the acknowledgement of receipt signed by Hawkeye and the manifest given to the carrier. He then verified each step along the paper trail, checking backwards, until he reviewed the original invoice of this sale to ensure that the date, price, quantity, and customer's name all match. This illustrates what type of auditing?

Answer 1

The type of auditing illustrated is substantive auditing, which involves verifying the accuracy and validity of transactions and account balances.

Step-by-step explanation:

The type of auditing illustrated in the given scenario is substantive auditing.

Substantive auditing involves examining the accuracy and validity of transactions and account balances. In this case, Steve is verifying the completeness and accuracy of the sales transaction between Black Widow Inc. and Hawkeye Ltd by reviewing the paper trail from the acknowledgement of receipt to the original invoice.
By checking the date, price, quantity, and customer's name on the original invoice, Steve ensures that all relevant information is consistent and accurate, providing evidence of the transaction's legitimacy.