Substantive tests of transactions are designed to verify the dollar value of transactions, while substantive tests of balances are tests that substantiate the ending balance of a general ledger account. A situation when a substantive test of balances can occur is when an auditor is testing accounts receivable balances. The auditor will verify that the balance in the general ledger agrees with the individual accounts receivable balances through confirmation possible using one of the examples of positive or negative confirmation above. Another example of when auditors may perform substantives tests of balances is when confirming inventory balances at the end of the year and associated accounts receivable balances.
Confirmations are type of audit evidence used to determine tests of details for accounts receivable balances. In general, “a….