Question 1

Performing substantive procedures prior to year-end, in the absence of specific effective controls, may be acceptable when:
A) the auditor is able to conclude overall that the client's control environment is effective.
B) the likelihood of errors or fraud is high.
C) the likelihood of errors or fraud is low.
D) both a and c.

Accepted Answer

Performing substantive procedures prior to year end can be acceptable when the auditor concludes that the client's control environment is effective (indicating a lower risk of material misstatement) and when the likelihood of errors or fraud is low. Both conditions suggest that earlier testing may not compromise the quality of the audit evidence obtained.

Question 2

Substantive testing can be conducted using which of the following procedures?
A) enquiry
B) confirmation
C) analytical review
D) all of the above

Accepted Answer

All of the above procedures (enquiry, confirmation, and analytical review) can be used to conduct substantive testing. These procedures help auditors gather sufficient and appropriate evidence to support significant account balances and transactions. Enquiry involves obtaining information from management or other employees, while confirmation involves obtaining information directly from third parties. Analytical review involves analyzing trends and relationships in financial data to identify potential misstatements or anomalies.

Question 3

Umberto Levinson has performed a test of controls of a flower shop. He is trying to determine the timing of substantive procedures at year-end. Which factor will determine the
Timing of his audit procedures?
A) timing of the year-end work
B) audit risk
C) inherent risk
D) control risk

Accepted Answer

The answer of Umberto Levinson has performed a test of...

Question 4

Jocelyne Yu is performing procedures and has decided to vouch the balance in the fixed assets ledger of a furniture manufacturing company back to supporting documentation. She is
Performing a
A) test of details.
B) test of controls.
C) risk assessment.
D) none of the above.

Accepted Answer

Jocelyne Yu is performing a test of details by verifying the fixed assets ledger against supporting documentation in order to ensure accuracy and completeness of the balance. Test of details is a substantive audit procedure that involves testing individual transactions or account balances to obtain audit evidence.

Question 5

Typically, substantive testing tends to be performed:
A) at the start of the financial year.
B) at or near year-end.
C) half way through the financial year.
D) only when the client's management allows the auditor to conduct the tests.

Accepted Answer

Substantive testing is typically performed at or near year-end when the financial statements are close to completion and the auditor can obtain sufficient evidence to support their opinion.

Question 6

The nature of substantive procedures normally consists of one or a combination of which of the following techniques?
A) analytical procedures
B) representative sampling
C) key item testing
D) all of the above

Accepted Answer

Substantive procedures can involve any or all of the techniques listed (analytical procedures, representative sampling, key item testing) depending on the situation and the auditor's judgment.

Question 7

Daniel Morency has performed evaluations of financial information and determined whether the fluctuations of his client's sales figures are consistent with other data he has gathered. He
Has used this information to predict year-end amounts of sales. This is an example of
Substantive procedures called
A) tests of details.
B) computer assisted audit techniques.
C) analytical procedures.
D) none of these.

Accepted Answer

The scenario described is that of performing analytical procedures, which involve analyzing financial data to identify any unusual fluctuations or relationships between different accounts. This can help auditors gain a better understanding of the client's financial position and identify areas that may require further investigation. Tests of details involve examining individual transactions or account balances in detail, while computer assisted audit techniques involve using specialized software to perform tasks such as data analysis or transaction testing.

Question 8

Which of the following examples of substantive procedures would often be performed prior to year-end?
A) confirming the client's bank balance
B) attending the client's annual inventory count
C) testing additions and disposals to the fixed asset register
D) performing confirmations of accounts receivable

Accepted Answer

Testing additions and disposals to the fixed asset register is typically performed prior to year-end because it allows for any necessary adjustments or corrections to be made in a timely manner. Confirmation of bank balances and accounts receivable are more typically performed at or near year-end to ensure the accuracy of financial statement balances. Attending an annual inventory count may be performed at year-end, but it is not necessarily a substantive procedure.

Question 9

Jacqueline Martineau was told by her audit senior to ensure that the evidence she provided through analytical procedures was both persuasive and corroborative. Which of the following
Evidences are persuasive?
A) When reviewing accruals for commissions refer to terms of agreements and payment dates.
B) When reviewing trade receivables or sales review the volatility of the customer base and compare with expectations.
C) When reviewing sales and commissions expense compare sales commissions or bonuses with related sales.
D) When reviewing payroll expense compare payroll tax expenses to the annual payroll times the statutory tax rates.

Accepted Answer

The answer of Jacqueline Martineau was told by her audit...

Question 10

Vouching involves:
A) tracking a source document through to the underlying accounting records.
B) agreeing the details of a transaction to supporting evidence outside of the company's accounting records.
C) the application of audit procedures to less than 100 per cent of items within a population.
D) none of the above.

Accepted Answer

Vouching involves agreeing the details of a transaction to supporting evidence outside of the company's accounting records. Option A is tracing, not vouching, Option C is sampling, not vouching, and Option D is not a correct answer.

Question 11

Which of the following statements is correct?
A) If detection risk is high, significant substantive procedures are necessary to reduce detection risk.
B) There is an inverse relation between the auditor's assessed risk of material misstatement and detection risk.
C) There is no relation between the auditor's assessed risk of material misstatement and detection risk.
D) If detection risk is low, only a small number of substantive procedures are necessary to reduce the detection risk.

Accepted Answer

The inverse relationship between the auditor's assessed risk of material misstatement and detection risk is a fundamental concept in audit risk assessment. When the assessed risk of material misstatement is high, the auditor will need to reduce detection risk by performing more substantive procedures to be reasonably assured of detecting any material misstatements. Conversely, if the assessed risk of material misstatement is low, the auditor may be able to rely more on internal controls and perform fewer substantive procedures to reduce detection risk.

Question 12

Roll-forward procedures are performed:
A) to update the audit findings from the time of the interim procedures through to year-end.
B) to detect fraud in various balance sheet accounts.
C) before the end of the financial year.
D) none of the above.

Accepted Answer

Roll-forward procedures are performed to update the audit findings from the time of the interim procedures through to year-end. This ensures that the auditor has up-to-date information and reduces the risk of misstatements in the financial statements. Option B is incorrect because roll-forward procedures are not specifically designed to detect fraud in various balance sheet accounts. Option C is incorrect because roll-forward procedures are performed after the year-end, not before. Option D is incorrect because roll-forward procedures are a standard audit procedure.

Question 13

Larry French is trying to determine the extent of testing his team will have to perform in order to determine whether controls are working. How will he decide how much testing to
Perform?
A) He will utilize statistical sampling.
B) He will use his professional judgment.
C) He will use last year's results as a basis for this year's tests.
D) None of the above.

Accepted Answer

Larry French will use his professional judgment to determine the extent of testing required to determine whether the controls are working. The decision should be based on various factors, such as the complexity of the control, the significance of the risk, the frequency of the testing, and the effectiveness of the control in previous periods. Utilizing statistical sampling or using the previous year's results as a basis may be helpful in certain circumstances, but ultimately, professional judgment should guide the decision-making process.

Question 14

Inherent risk is:
A) assessed as high when there are no internal controls tested or relied upon by the auditor.
B) assessed as low when there are good internal controls in place.
C) the risk of a misstatement occurring irrespective of any internal controls put in place by management.
D) the risk that the auditor's testing procedures will not detect a material misstatement.

Accepted Answer

Inherent risk is the risk of a misstatement occurring irrespective of any internal controls put in place by management. It is not affected by the quality of internal controls, but rather by the nature of the entity's operations and industry. The other options are incorrect because they do not accurately describe inherent risk.

Question 15

Stella Zhang has been performing analytical procedures techniques as a substantive test. The techniques that can be used to perform analytical procedures are:
A) preparation of common sized financial statements.
B) breakeven analysis.
C) ratio analysis.
D) all of the above.

Accepted Answer

All of the techniques mentioned – preparation of common sized financial statements, breakeven analysis, and ratio analysis – can be used to perform analytical procedures as substantive tests. Therefore, the best choice is D, all of the above.

Question 16

The primary purpose of vouching is to ensure that:
A) the balances or transactions are not understated.
B) sufficient information is disclosed in the notes to the financial statements.
C) the balances or transactions are not overstated.
D) all transactions have been recorded.

Accepted Answer

The primary purpose of vouching is to ensure that the balances or transactions are not overstated. This is achieved by checking the supporting documents to ensure that all transactions recorded in the financial statements are valid and accurate. Vouching also helps to detect any errors or irregularities in the financial statements.

Question 17

Tobias Appel is trying to ensure that he can review controls over purchasing transactions. In addition he would like to substantiate the dollar amounts he is reviewing. What type of
Procedures can he perform that will provide evidence as to whether a control is effective as well
As if an item is being recorded properly?
A) statistical sampling
B) dual purpose tests
C) test of balances
D) test of controls

Accepted Answer

Dual purpose tests allow Tobias Appel to both test the effectiveness of controls and substantiate dollar amounts. This type of testing involves selecting a sample of transactions and performing both control testing procedures and substantive testing procedures on the same sample. This allows Tobias Appel to obtain evidence on both the effectiveness of controls and the accuracy of recorded amounts. Statistical sampling and test of balances are more focused on substantiating dollar amounts, while test of controls is more focused on testing the effectiveness of controls only.

Question 18

Tracing is primarily directed towards verifying which of the following assertions?
A) completeness
B) existence
C) occurrence
D) valuation

Accepted Answer

Tracing is an audit procedure used to test the completeness assertion. It involves selecting source documents and following them through to the accounting records to ensure that all transactions and events have been recorded.

Question 19

Which of the following factors should not influence the extent and timing of when substantive procedures are performed?
A) the type of audit opinion that the client would like the auditor to issue
B) the complexity of the client's data capturing systems
C) the level of assurance necessary
D) the type of evidence required

Accepted Answer

The type of audit opinion that the client would like the auditor to issue should not influence the extent and timing of when substantive procedures are performed as the auditor's job is to provide an independent and objective opinion on the financial statements. Therefore, the auditor needs to follow the auditing standards and perform substantive procedures based on the inherent risk and materiality of the financial statement accounts, regardless of the client's desired opinion.

The complexity of the client's data capturing systems, the level of assurance necessary, and the type of evidence required are all factors that should be considered when determining the extent and timing of substantive procedures as they can affect the auditor's ability to obtain sufficient and appropriate audit evidence.

Question 20

The purpose of substantive procedures includes obtaining direct evidence as to:
A) the reasonableness of the estimates and other information in the financial statements.
B) the completeness, accuracy and validity of data.
C) both a and b.
D) none of the above.

Accepted Answer

Substantive procedures are designed to obtain sufficient and appropriate evidence about the completeness, accuracy, and validity of data in the financial statements. This includes obtaining direct evidence about the reasonableness of estimates and other information in the financial statements. Therefore, both option A and B are correct.

Quiz 9: Execution of the Auditperforming Substantive Procedures

Performing substantive procedures prior to year-end, in the absence of specific effective controls, may be acceptable when:

Substantive testing can be conducted using which of the following procedures?

Umberto Levinson has performed a test of controls of a flower shop. He is trying to determine the timing of substantive procedures at year-end. Which factor will determine the Timing of his audit procedures?

Jocelyne Yu is performing procedures and has decided to vouch the balance in the fixed assets ledger of a furniture manufacturing company back to supporting documentation. She is Performing a

Typically, substantive testing tends to be performed:

The nature of substantive procedures normally consists of one or a combination of which of the following techniques?

Which of the following examples of substantive procedures would often be performed prior to year-end?

Jacqueline Martineau was told by her audit senior to ensure that the evidence she provided through analytical procedures was both persuasive and corroborative. Which of the following Evidences are persuasive?

Vouching involves:

Which of the following statements is correct?

Roll-forward procedures are performed:

Larry French is trying to determine the extent of testing his team will have to perform in order to determine whether controls are working. How will he decide how much testing to Perform?

Inherent risk is:

Stella Zhang has been performing analytical procedures techniques as a substantive test. The techniques that can be used to perform analytical procedures are:

The primary purpose of vouching is to ensure that:

Tracing is primarily directed towards verifying which of the following assertions?

Which of the following factors should not influence the extent and timing of when substantive procedures are performed?

The purpose of substantive procedures includes obtaining direct evidence as to: