Early substantive testing of inventory balances is only done when
A)the client has a good system of internal controls relating to expense account balances
B)the client has good policies and procedures relating to the account balances
C)the client has a good system of internal controls relating to the account balances.
D)the client has good policies and procedures relating to the account balances.

Question

Quizplus · Accepted Answer

Early substantive testing of inventory balances is only done when the client has a good system of internal controls relating to the account balances. This is because substantive testing is used when there is a higher risk of material misstatement in the account balance, and a good system of internal controls can provide assurance that the balance is accurate. Good policies and procedures are also important, but they may not necessarily indicate a strong system of internal controls.

Early Substantive Testing of Inventory Balances Is Only Done When