Question 1

Analytical procedures are evaluations of financial information made by a study of plausible relationships among both financial and non-financial data. Discuss why analytical procedures are used by an auditor and explain several of the common types of analytical procedures.

Accepted Answer

The answer of Analytical procedures are evaluations of financial information...

Question 2

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

Question 3

Explain the three common sampling strategies that can be applied when the auditor applies representative sampling.

Accepted Answer

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Question 4

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.

Question 5

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

Accepted Answer

Substantive procedures are used to obtain evidence about the completeness, accuracy, and validity of the financial statements. The levels of evidence obtained when performing substantive procedures include minimal, persuasive, and general.

Question 6

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

Accepted Answer

Tracing is primarily directed towards verifying the completeness assertion, ensuring that all transactions that should have been recorded have indeed been recorded.

Question 7

Analytical procedures that provide persuasive evidence include:
A) reviewing the cash accounts in the general ledger for unusual items.
B) relating average amounts invested to an average interest rate.
C) comparing the number of days purchases in trade payables with prior years.
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 calculations based on established relationships between different financial data. This analytical procedure can identify any discrepancies or irregularities that may suggest errors or potential fraud. The other options listed may also be helpful in detecting certain types of irregularities, but they are not necessarily as persuasive as relating average amounts invested to an average interest rate.

Question 8

Explain the difference between vouching and tracing.

Accepted Answer

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Question 9

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 10

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

Accepted Answer

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

Question 11

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

Accepted Answer

Confirmation analysis is not a type of analytical procedure; it involves obtaining evidence from third parties, whereas the other options are analytical procedures used to evaluate financial information.

Question 12

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 13

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

Vouching is the process of examining a sample of transactions to ensure that they are supported by evidence and actually occurred. Its primary purpose is to ensure that the balances or transactions are not overstated, as opposed to being understated.

Question 14

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

Accepted Answer

Comparing sales commissions or bonuses with related sales provides corroborative evidence as it supports the accuracy of sales figures by showing a relationship between sales and the resulting commissions or bonuses.

Question 15

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) after 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. These procedures ensure that the auditor has considered all relevant financial transactions and events that have occurred in the period between the interim date and year-end.

Question 16

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

Accepted Answer

Analytical procedures are not used in testing internal controls as they focus on relationships between financial and non-financial data and do not provide direct evidence of the effectiveness of internal controls.

Question 17

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

Accepted Answer

The first step in performing analytical procedures is to identify the computation, comparison, or relationship to be made or investigated. This involves determining which data will be analyzed and how it will be analyzed in order to identify potential issues or anomalies. Once this step is completed, the auditor can move on to assessing the reliability of any data to be used, determining appropriate procedures for investigating significant differences, and drawing conclusions based on the analysis.

Question 18

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

The answer of Performing substantive procedures prior to year-end, in...

Question 19

Overall significant account conclusion statements are captured on:
A) audit programs.
B) lead sheets.
C) confirmation requests.
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 bridge between the detailed audit work and the financial statements, capturing overall conclusions on significant accounts.

Question 20

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

Accepted Answer

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

Quiz 9: Execution of the Audit Performing Substantive Procedures

Analytical procedures are evaluations of financial information made by a study of plausible relationships among both financial and non-financial data. Discuss why analytical procedures are used by an auditor and explain several of the common types of analytical procedures.

Variables estimation sampling is used:

Explain the three common sampling strategies that can be applied when the auditor applies representative sampling.

Vouching involves:

The levels of evidence obtained when performing substantive procedures includes:

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

Analytical procedures that provide persuasive evidence include:

Explain the difference between vouching and tracing.

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.

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

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

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

The primary purpose of vouching is to ensure that:

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

Roll-forward procedures are performed:

Analytical procedures may not be used:

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

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

Overall significant account conclusion statements are captured on:

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