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You have substantive and analytical testing. Substantive tests include actual detail testing of transactions (i.e., agreeing checks to invoices, etc.). Analytical tests include fluctuation analysis of revenue and expense accounts (i.e., current year to prior year). Analytics also include ratio analysis (ie., A/R turn, bad debt expense to total A/R percentage, etc.). Auditors typically use substantive tests as the core of their asset and liability testing where as analytics are used as primary testing for p&l accounts. That said, both types of testing can be utilized for all areas of the financial statements.
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I didn't see your previous reply until today which was definitely too late. I have another question if you would like to take a stab at it. It is homework but I cannot figure it out. It deals with the Apollo Shoes Case.Apollo Shoes Case Complete the “Internal Control” audit section of the case. Before completing this section, review the “Planning” section, with emphasis on the Apollo Accounting and Control Procedures Manual and the Apollo Shoes Minutes.
No problem. I don't have the information on the Apollo Shoes Case so it would be best if you close out this question and post a new question giving the details.