Certified Government Auditing Professional (CGAP) Practice Exam 2026 – The All-in-One Guide to Exam Success

Substantive testing is a crucial part of the audit process, primarily focusing on validating the accuracy and completeness of financial statements. It involves the examination of transactions and account balances to gather evidence that supports the amounts reported in the financial statements. This testing is essential for auditors to ascertain whether the financial information is free from material misstatement and is presented fairly in accordance with applicable accounting standards.

The practice of substantive testing contrasts with testing internal controls, which evaluates the effectiveness of processes and systems in place to mitigate risks of financial misstatements. While both types of testing are important in the audit process, substantive testing directly addresses the numbers reported and their validity.

Reviewing audit reports for compliance typically falls under an evaluation phase rather than a substantive testing phase, as it deals more with the outputs of audits rather than the underlying financial data itself. Additionally, conducting surveys of financial condition is an analytical approach that may help in understanding the overall financial status but does not provide the detailed evidence needed to support specific account balances or transactions.

Thus, substantive testing's focus on examining the transactions and account balances directly establishes the reliability of the financial data, making it a fundamental aspect of the audit process.