Key CPA Exam Takeaways
High-Yield Review
- Substantive procedures include tests of details and substantive analytical procedures.
- Cash is primarily tested using bank confirmations and reconciliations.
- Accounts receivable confirmations provide strong evidence of existence.
- Positive confirmations provide stronger evidence than negative confirmations.
- Observation of physical inventory is generally required for material inventory.
- Inventory testing includes existence, valuation, ownership, and cutoff.
- Investment audits emphasize confirmations, ownership, fair value, and presentation.
- Every substantive procedure should be linked to one or more financial statement assertions.
Choose the audit procedure that best addresses the assertion being tested.
Summary
Substantive procedures for cash, receivables, inventory, and investments are among the most frequently tested topics on the CPA AUD exam because they demonstrate how auditors obtain direct evidence for significant financial statement accounts.