Lesson: Substantive Procedures Based on Assertions

In this lesson, Nick Palazzolo discusses the various substantive procedures based on assertions, particularly as they pertain to a fictitious manufacturing company. The lesson delves into specific assertions and procedures, such as existence, which includes physical examination, confirmation of inventory at outside locations, and inspecting transaction documents. The lesson also covers differentiating inventory from other items, examining perpetual inventory records, and reconciling items with sales catalogs. Nick explains the importance of inquiries and using specialists in understanding the nature of specialized products. Furthermore, the lesson discusses the rights and obligations related to inventory, such as examining paid vendors' invoices, consignment agreements, and contracts. This lesson provides a thorough understanding of the different substantive procedures required in various situations to ensure that auditors can handle substantive tests effectively during the CPA exam.