Question

Every audit will involve _______.

1) conflicts with management pertaining to estimates
2) relying on the internal audit function for production of evidentiary matter
3) some amount of substantive testing because audit standards require it for relevant assertions
4) no substantive testing because audit standards require it not to be conducted for relevant assertions

Answer 1

Every audit involves (Option 3) some amount of substantive testing as required by audit standards for relevant assertions. Substantive testing is used to obtain sufficient audit evidence for the financial statements. The process is somewhat similar to confirming the existence of a tangible item, like milk in a refrigerator, through verification.

Step-by-step explanation:

Every audit will involve some amount of substantive testing because audit standards require it for relevant assertions. This is because substantive testing is a key component in obtaining audit evidence to reach a conclusion on the fairness of the financial statements. Typically, auditors use a combination of substantive testing and other audit procedures to assess the reliability of financial information provided by a company. Substantive testing may include verification of transactions, balances, and disclosures.