The results of substantive tests of sales and cash receipts transactions are used to determine the level of planned detection risk for each accounts receivable balance-related audit objective.

Question

Quizplus · Accepted Answer

Substantive tests of sales and cash receipts transactions can provide important evidence about the accuracy and completeness of accounts receivable balances. Based on the results of these tests, auditors can adjust their assessments of detection risk, which is the risk that material misstatements in the accounts receivable balances will not be detected by audit procedures. By setting a lower level of detection risk, auditors can increase the level of assurance provided by their audit procedures and reduce the likelihood of material misstatements going undetected.

The Results of Substantive Tests of Sales and Cash Receipts