ACCA Advanced Audit and Assurance (AAA) Practice Exam

What is an activity included under accuracy, valuation, and allocation substantive tests?

1. Performing employee evaluations

2. Confirming policies with external parties

3. Matching amounts to invoices

4. Conducting training sessions

The correct answer is: Matching amounts to invoices

Substantive tests for accuracy, valuation, and allocation involve examining figures to ensure they are recorded correctly, valued appropriately, and allocated to the correct accounting periods and accounts. Matching amounts to invoices is a direct method to verify that recorded amounts in the financial statements correspond accurately to the amounts billed in invoices. This process assesses whether sales or purchase transactions are correctly reflected in the accounts, thus contributing to the reliability of financial reporting. By confirming the amounts match, auditors can be confident about the accuracy of revenue recognition or expense classifications, which is crucial for understanding the organization's financial position and performance. Other activities such as performing employee evaluations and conducting training sessions do not involve the examination of financial data and therefore do not fit within the scope of accuracy, valuation, and allocation tests. Similarly, confirming policies with external parties pertains more to compliance or internal controls rather than directly assessing the accuracy of financial figures.