The auditor uses substantive tests of balances in the inventory process to
A)gather evidence for income statement accounts in the business process
B)gather evidence for balance sheet accounts in the business process
C)determine the valuation of income statement accounts in the business process
D)determine the valuation for balance sheet accounts in the business process
E)Both B and D

Question

Quizplus · Accepted Answer

Substantive tests of balances are used for balance sheet accounts, and in the case of inventory, it would be used to determine the valuation of inventory (a balance sheet account) by testing physical inventory counts, cost calculations, and other valuation methods. However, the results of these tests may also impact certain income statement accounts related to inventory, such as cost of goods sold or inventory write-downs. Therefore, the answer is Both B and D.

The Auditor Uses Substantive Tests of Balances in the Inventory