Substantive tests of transactions and balances - Week 7

Question 1

Explain the relationship between substantive tests of transactions (STOT) and substantive test of balances (STOB)

Answer 1

STOT focuses on the individual transactions that make up the account balances. STOB substantiates the ending balance of an account (which is comprised of multiple transactions).

Question 2

What is the difference between Test of Controls (ToC) and substantive test of details? What is a dual-purpose test?

Answer 2

Test of controls do not directly measure monetary error in accounting records.
Substantive test of details DO directly measure monetary error in accounting records.
Dual-purpose test address both control and substantive matters together.

Question 3

What is the difference between vouching and tracing?

Answer 3

We are always vouching for existence, and tracing for completeness.
Vouching (from accounting records to source documents) we are looking for existence!
Tracing (from source documents to accounting records) we are looking for completeness!