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:

True

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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Practice the full ACCA BT — Business & Technology Practice Exam 6

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