ExpertMedium1 markMultiple Choice
ACCA · Question 39 · Business functions, regulation and technology
True or False: In auditing, 'compliance testing' is used to verify the monetary accuracy of a specific transaction, whereas 'substantive testing' checks if internal controls are operating effectively.
True or False: In auditing, 'compliance testing' is used to verify the monetary accuracy of a specific transaction, whereas 'substantive testing' checks if internal controls are operating effectively.
Answer options:
A.
True
B.
False
How to approach this question
Remember: Compliance = Did they comply with the rules/controls? Substantive = Is the substance (the money/numbers) correct?
Full Answer
B.False✓ Correct
Compliance testing (or tests of controls) evaluates the operating effectiveness of internal controls. Substantive testing gathers evidence on the completeness, validity, and accuracy of the financial data.
Common mistakes
Getting the two definitions backwards.
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