AA – L2 – SA – Q3.8 – Substantive Test for Inventories

Non-substantive test for inventory audit.

Question

Which of the following is NOT a substantive test for the audit of inventories?

A Test the updating of all inventory count differences to inventory records

B Test the accuracy of net realizable value through the review of post year-end sales

C Have satisfactory explanations been explained for all material inventory count differences

D Check that all administrative overheads have been correctly accrued for in the valuation of inventories

Answer

Explanation:
Substantive tests verify financial statement balances, e.g., updating count differences (A), testing net realizable value (B), and checking overhead accruals (D). Obtaining explanations for count differences (C) is a follow-up procedure, not a substantive test, as it doesn’t directly verify balances. Thus, C is correct.

Tags: ICAG, Inventories, Substantive Test, Valuation
Level: Level 2

Topic: Audit and Assurance Evidence

Uploader: Salamat Hamid