Question 1

The nature of substantive procedures normally consists of one or a combination of which of the following techniques?
A)Key item testing
B)Analytical procedures
C)Representative sampling
D)All of the above

Accepted Answer

Substantive procedures typically involve a combination of different techniques, including key item testing, analytical procedures, and representative sampling. Each of these techniques serves a specific purpose and may be used depending on the nature of the transaction being audited and the auditor's objective. Therefore, the best choice is D, all of the above.

Question 2

Comparing sales commissions or bonuses with related sales provides what level of evidence?
A)Minimal
B)Corroborative
C)Absolute
D)Persuasive

Accepted Answer

Comparing sales commissions or bonuses with related sales can provide corroborative evidence, meaning it supports or strengthens other evidence or arguments. However, it is not enough on its own to be considered absolute or persuasive evidence.

Question 3

There are certain audit procedures that are required to be performed according to various auditing standards.Identify specific examples of such procedures and explain why the procedures are mandatory.

Accepted Answer

The answer of There are certain audit procedures that are...

Question 4

Discuss the factors that influence the extent and timing of substantive procedures.

Accepted Answer

The answer of Discuss the factors that influence the extent...

Question 5

Identify the steps used by the auditor when performing analytical procedures.

Accepted Answer

The answer of Identify the steps used by the auditor...

Question 6

Analytical procedures that provide persuasive evidence include:
A)comparing the number of days purchases in trade payables with prior years.
B)reviewing the cash accounts in the general ledger for unusual items.
C)relating average amounts invested to an average interest rate.
D)reviewing the property,plant and equipment account in the general ledger for unusual items.

Accepted Answer

Relating average amounts invested to an average interest rate can provide persuasive evidence as it involves a direct relationship that can be analytically verified, offering insights into the reasonableness of interest income or expense.

Question 7

Typically,substantive testing tends to be performed:
A)half way through the financial year.
B)at the start of the financial year.
C)at or near year-end.
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 majority of transactions have occurred and financial statements are being prepared for audit. This allows the auditor to obtain sufficient evidence to support their opinion on the financial statements.

Question 8

Explain the difference between vouching and tracing.

Accepted Answer

The answer of Explain the difference between vouching and tracing....

Question 9

Explain the four different levels of evidence obtained when performing substantive procedures.

Accepted Answer

The answer of Explain the four different levels of evidence...

Question 10

Which of the following is not a type of analytical procedure?
A)Break-even analysis
B)Confirmation analysis
C)Ratio analysis
D)Trend analysis

Accepted Answer

Confirmation analysis is not a type of analytical procedure used in accounting or finance. Analytical procedures involve the analysis of financial information through the use of ratios, trends, and comparisons, such as break-even analysis, ratio analysis, and trend analysis, to assess an entity's financial position or performance. Confirmation analysis, however, does not fit into this category as it refers to the audit process of obtaining and evaluating a direct communication from a third party in response to a request for information regarding an account balance or transaction, rather than analyzing financial data through calculations or comparisons.

Question 11

Roll-forward procedures are performed:
A)after the end of the financial year.
B)to update the audit findings from the time of the interim procedures through to year-end.
C)to detect fraud in various balance sheet accounts.
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 helps ensure that the audit is current and accurate at the end of the financial year. Option A is incorrect as roll-forward procedures are performed throughout the year and not necessarily after the end of the financial year. Option C is incorrect as roll-forward procedures are not specifically designed to detect fraud, although they may help uncover it. Option D is incorrect as there is at least one correct answer.

Question 12

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

Accepted Answer

Vouching is the process of tracing or verifying a transaction from the original source document through to the underlying accounting records. In option C, agreeing the details of a transaction to supporting evidence outside of the company's accounting records is the most relevant and accurate description of vouching. Option A describes sampling, while option B describes tracing. Option D is incorrect because vouching is a recognized audit procedure.

Question 13

Variables estimation sampling The auditor uses this technique if they expect more than a few errors in an account balance.This technique can be used when the concern is both understatement and overstatement,and is therefore different to representative sampling.Variables estimation sampling is usually applied to detect misstatements of the book values (carrying amounts or recorded values)of populations.

Accepted Answer

The answer of Variables estimation sampling The auditor uses this...

Question 14

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

Accepted Answer

Vouching is primarily aimed at verifying that the transactions recorded in the financial statements are accurate and not overstated, ensuring the authenticity and validity of the entries made.

Question 15

Which of the following is the first step an auditor performs when performing analytical procedures?
A)Identify the computation,comparison or relationship to be made or investigated
B)Determine appropriate procedures for investigating the reasons for differences if they are significant
C)Draw conclusions
D)Assess the reliability of any data to be used

Accepted Answer

The auditor's first step in performing analytical procedures is to identify the computation, comparison or relationship to be made or investigated. This helps the auditor in focusing on areas that are likely to be material and require further examination.

Question 16

Variables estimation sampling is used:
A)when the auditor conducts tests of controls.
B)when the auditor does not expect any errors in an account balance.
C)to obtain a level of confidence that key attributes for the sample tested can be inferred to be in existence for the entire population.
D)if the auditor expects more than a few errors in an account balance.

Accepted Answer

Variable estimation sampling is used when the auditor expects there might be errors in an account balance and wants to estimate the amount of those errors. It helps in assessing the magnitude of misstatements in financial statements.

Question 17

Tracing is primarily directed towards verifying which of the following assertions?
A)Occurrence
B)Completeness
C)Existence
D)Valuation

Accepted Answer

Tracing is primarily used to verify the completeness assertion. It involves selecting source documents and following them into the accounting records to ensure that all events and transactions have been recorded, thus ensuring completeness.

Question 18

The levels of evidence obtained when performing substantive procedures includes:
A)general
B)minimal
C)persuasive
D)All of the above

Accepted Answer

All the options listed (general, minimal, persuasive) are considered levels of evidence that can be obtained when performing substantive procedures in an audit context. The level of evidence required can vary depending on the risk assessment and the nature of the assertion being tested.

Question 19

Analytical procedures may not be used:
A)to provide at least some minimal level of support for the conclusion.
B)as primary tests of an account balance.
C)in testing internal controls.
D)as corroborative tests in combination with other procedures.

Accepted Answer

Analytical procedures are used in auditing to understand financial information by studying plausible relationships among both financial and nonfinancial data. They are not typically used in testing internal controls, which often require more direct testing methods such as observation, inspection, and re-performance.

Question 20

Overall significant account conclusion statements are captured on:
A)confirmation requests.
B)audit programs.
C)lead sheets.
D)minutes of board of directors' meetings.

Accepted Answer

Lead sheets are used by auditors to summarize and conclude on the significant accounts and aspects of an audit. They serve as a guide for reviewing the work done and ensuring that significant conclusions regarding account balances or transactions are appropriately documented and supported.

Quiz 9: Execution of the Audit Performing Substantive Procedures

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

Comparing sales commissions or bonuses with related sales provides what level of evidence?

There are certain audit procedures that are required to be performed according to various auditing standards.Identify specific examples of such procedures and explain why the procedures are mandatory.

Discuss the factors that influence the extent and timing of substantive procedures.

Identify the steps used by the auditor when performing analytical procedures.

Analytical procedures that provide persuasive evidence include:

Typically,substantive testing tends to be performed:

Explain the difference between vouching and tracing.

Explain the four different levels of evidence obtained when performing substantive procedures.

Which of the following is not a type of analytical procedure?

Roll-forward procedures are performed:

Vouching involves:

The primary purpose of vouching is to ensure that:

Which of the following is the first step an auditor performs when performing analytical procedures?

Variables estimation sampling is used:

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

The levels of evidence obtained when performing substantive procedures includes:

Analytical procedures may not be used:

Overall significant account conclusion statements are captured on: