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How do the tests of controls and substantive tests of transactions affect the tests of details of balances?

How do the tests of controls and substantive tests of transactions affect the tests of details of balances?

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Asked by Easton, Last updated: Jun 30, 2020

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3 Answers

Matz Lewis Clark

Traveler and writer by profession.

Matz Lewis Clark, College student, Graduation, Orlando

Answered Jul 18, 2019

A test of controls is a procedure that auditors use. Its purpose is to test how effective control that a client uses is. Auditors also use substantive testing. The purpose of these errors is to check for any errors in financial statements and any documents that supplement the statements.

The results from these tests are used to provide that the tests performed are reasonable, which affects the tests of details of balance. It also affects how a financial statement is balanced. This question is related to auditing, and it would be necessary for an auditor to know these terms.

 

Danny R. Glover

Danny R. Glover, Editor, New York City

Answered Jul 11, 2018

The test of details of balances is meant to prove that the tests of control and the substantive tests of transactions are reasonable. The test of control is an audit test. It is meant to measure the effectiveness of the controls. If the test shows that the controls are weak, this will have an effect on the test of details of balances.

The substantive tests are in charge of checking the current financial statements of the company. It will also check the different supporting data to see if they all coincide with each other. The results of this test will also show through the test of details of balances. If there are deficits involved, then the financial statement cannot be balanced correctly.

 

John Smith

John Smith

Answered Sep 08, 2016

Tests of details of balances are designed to determine the reasonableness of the balances in sales, accounts receivable, and other account balances that are affected by the sales and collection cycle. such tests include confirmation of accounts receivable, and examining documents supporting the balance in these accounts.tests of controls and substantive tests of transactions for the sales and collection cycle are intended to determine the effectiveness of internal controls and to test the substance of the transactions that are produced by this cycle. such tests consist of activities such as examining sales invoices in support of entries in the sales journal, reconciling cash receipts, or reviewing the approval of credit.the results of the tests of controls and substantive tests of transactions affect the procedures, sample size, timing and items selected for the tests of details of balances (i.e., effective internal controls will result in reduced testing when compared to the tests of details required in the case of inadequate internal controls). the results of tests of controls also affect the public company auditors report on internal controls over financial reporting.
 

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