When comparing equipment in production with inventory records, what type of testing is being conducted?

When comparing equipment in production with inventory records, the type of testing being conducted is substantive testing. This involves verifying the existence and condition of assets recorded in the inventory management system to ensure that financial statements are accurate and that the reported figures truly reflect reality. Substantive testing includes procedures that provide direct evidence of the financial statement assertions, particularly regarding the completeness and accuracy of records.

In this context, by physically inspecting the equipment and comparing it to what is documented in the inventory records, auditors can substantiate that the reported amounts are correct. This approach helps identify potential discrepancies, such as unrecorded or missing assets, which can have significant implications for financial reporting. Thus, substantive testing is crucial for assessing financial assertions related to inventory and assets.