Question 1

Maury Lions is ready to undertake substantive procedures at an educational institution. Which of the following factors will influence his substantive tests?
A) the nature of the test
B) the type of evidence required
C) the complexity of the client's data capturing systems
D) all of the above

Accepted Answer

All of the factors listed (the nature of the test, the type of evidence required, and the complexity of the client's data capturing systems) will influence the design and execution of substantive tests at an educational institution.

Question 2

Misstatements can only arise from fraud.

Accepted Answer

Misstatements can arise from both fraud and error. Fraudulent misstatements are intentional and made with the intent to deceive, while errors may be unintentional and arise from a variety of sources, such as mistakes in recording transactions or incorrect assumptions about accounting principles.

Question 3

Analytical procedures may not be useful when they are used on a company with significantly
diverse operations and geographical segments.

Accepted Answer

Analytical procedures rely on comparing financial data to identify trends and anomalies. If a company operates in diverse segments or geographical locations, there may be significant differences in their financial data across these areas, making it difficult to identify meaningful trends or anomalies. Therefore, analytical procedures may not be as useful in these situations.

Question 4

A significant account is one that could contain material misstatements based upon their
materiality and/or relationship to identified inherent and financial statement risks.

Accepted Answer

A significant account is one that has the potential to contain material misstatements, either because of its materiality or its relationship to specific inherent and financial statement risks. Therefore, the statement is true.

Question 5

Manny Regimbald is concerned about the audit of a high risk client, the Lewiston Stampeders. He believes that there is a high likelihood that because his audit team is
Inexperienced that the testing procedures will not detect a material misstatement. This is a(n)
A) audit risk.
B) control risk.
C) detection risk.
D) none of the above.

Accepted Answer

Manny's concern about the testing procedures not detecting a material misstatement due to the audit team's inexperience relates to detection risk. Detection risk is the risk of the audit procedures failing to detect a material misstatement. It is one of the three components of audit risk, which also includes inherent risk and control risk. Therefore, choice C is the correct answer.

Question 6

Corroborative evidence confirms audit findings from other procedures.

Accepted Answer

Corroborative evidence is evidence that supports or confirms audit findings from other procedures. Therefore, the statement is true.

Question 7

Comparing the number of days purchases in trade payables with prior years would provide
persuasive evidence of accounts payable.

Accepted Answer

Comparing the number of days purchases in trade payables with prior years helps in analyzing trends and assessing the efficiency of a company's payables management, but it does not directly provide persuasive evidence regarding the accuracy of the accounts payable balance.

Question 8

Ying Ye believes that she will have to employ sophisticated substantive audit procedures for her client. What contributes to this decision?
A) the nature of the client's accounting system
B) the nature of the internal controls
C) the complexity of the client's data capturing systems
D) none of the above.

Accepted Answer

The answer of Ying Ye believes that she will have...

Question 9

Normally, it is more efficient to carry out substantive procedures than to test and rely on
controls.

Accepted Answer

Testing and relying on controls can often be more efficient than carrying out substantive procedures, especially if the controls are strong and well-established, reducing the need for extensive substantive testing.

Question 10

The lack of significant change in an account balance from one year to the next does not
necessarily mean that the auditor can assume the balance is reasonable.

Accepted Answer

The lack of significant change could be due to errors, fraud, or undisclosed liabilities, among other reasons, so the auditor cannot assume the balance is reasonable without further investigation and analysis.

Question 11

The audit program serves as the instructions for the audit team members to complete the
required testing.

Accepted Answer

The audit program outlines the procedures and steps to be followed by the audit team in order to conduct the audit and complete the required testing.

Question 12

Audit sampling is the application of audit procedures to less than 100 per cent of items within
a population.

Accepted Answer

Audit sampling involves selecting and testing a sample of items from a larger population, rather than examining every single item. Therefore, it is true that audit sampling involves applying audit procedures to less than 100% of items within a population.

Question 13

Control risk is assessed to be low when there are no internal controls tested or relied upon by
the auditor.

Accepted Answer

Control risk is not automatically assessed as low when there are no internal controls tested or relied upon by the auditor. This assessment depends on the overall control environment and the specific risks associated with the financial statement assertions being audited.

Question 14

Analytical procedures that provide persuasive or corroborative evidence contribute minimal
support for the audit conclusion.

Accepted Answer

Analytical procedures that provide persuasive or corroborative evidence can in fact provide significant support for the audit conclusion. However, they should not be relied upon as the sole basis for the conclusion and should always be supplemented with other audit procedures.

Question 15

The timing of substantive procedures is directly influenced by the level of control risk.

Accepted Answer

The higher the control risk, the more necessary it is to perform substantive procedures at or near the year-end to obtain sufficient audit evidence. Conversely, if control risk is assessed as low, the auditor may choose to perform substantive procedures at an interim date.

Question 16

After performing a risk assessment of a food processing company, Sean Spino has come to the conclusion that he will require more evidence to be obtained by his audit team from
Substantive procedures. Which of the factors below led him to this conclusion?
A) the level of assurance necessary
B) the type of evidence required
C) the nature of the test
D) the complexity of the client's data capturing systems

Accepted Answer

The level of assurance necessary is the primary factor that determines the amount of evidence that is required.

Question 17

Vouching involves tracking a source document back to the underlying accounting records.

Accepted Answer

The answer of Vouching involves tracking a source document back...

Question 18

Roll-forward procedures are performed during the period between the end of the financial
year and the date of the audit report.

Accepted Answer

The answer of Roll-forward procedures are performed during the period...

Question 19

Matilda Papas has been asked to lead her audit team in the audit of the Toronto Raptors basketball team. She performed a review of their risks and found that the team's risks tend to
Be driven by the nature of certain significant accounts or business activities that the Raptors
Pursue. This risk is
A) audit risk.
B) inherent risk.
C) control risk.
D) detection risk.

Accepted Answer

The nature of significant accounts or business activities driving risk suggests inherent risk, which is the risk of material misstatement before considering internal controls. Audit risk (A) is the risk of expressing an inappropriate opinion on financial statements, control risk (C) is the risk that a material misstatement would not be prevented or detected by internal controls, and detection risk (D) is the risk that audit procedures will not detect a material misstatement. Although all of these risks are interrelated and impact the overall audit approach, the specific nature of the risk identified here points to inherent risk.

Question 20

Key item testing is an example of a technique used when conducting substantive procedures.

Accepted Answer

Key item testing is a substantive procedure used to test significant or high-risk transactions, account balances, or disclosures. It involves testing a sample of transactions or items that are considered critical to the financial statements to ensure they are accurately recorded and presented.

Quiz 9: Execution of the Auditperforming Substantive Procedures

Maury Lions is ready to undertake substantive procedures at an educational institution. Which of the following factors will influence his substantive tests?

Misstatements can only arise from fraud.

Analytical procedures may not be useful when they are used on a company with significantly diverse operations and geographical segments.

A significant account is one that could contain material misstatements based upon their materiality and/or relationship to identified inherent and financial statement risks.

Manny Regimbald is concerned about the audit of a high risk client, the Lewiston Stampeders. He believes that there is a high likelihood that because his audit team is Inexperienced that the testing procedures will not detect a material misstatement. This is a(n)

Corroborative evidence confirms audit findings from other procedures.

Comparing the number of days purchases in trade payables with prior years would provide persuasive evidence of accounts payable.

Ying Ye believes that she will have to employ sophisticated substantive audit procedures for her client. What contributes to this decision?

Normally, it is more efficient to carry out substantive procedures than to test and rely on controls.

The lack of significant change in an account balance from one year to the next does not necessarily mean that the auditor can assume the balance is reasonable.

The audit program serves as the instructions for the audit team members to complete the required testing.

Audit sampling is the application of audit procedures to less than 100 per cent of items within a population.

Control risk is assessed to be low when there are no internal controls tested or relied upon by the auditor.

Analytical procedures that provide persuasive or corroborative evidence contribute minimal support for the audit conclusion.

The timing of substantive procedures is directly influenced by the level of control risk.

After performing a risk assessment of a food processing company, Sean Spino has come to the conclusion that he will require more evidence to be obtained by his audit team from Substantive procedures. Which of the factors below led him to this conclusion?

Vouching involves tracking a source document back to the underlying accounting records.

Roll-forward procedures are performed during the period between the end of the financial year and the date of the audit report.

Matilda Papas has been asked to lead her audit team in the audit of the Toronto Raptors basketball team. She performed a review of their risks and found that the team's risks tend to Be driven by the nature of certain significant accounts or business activities that the Raptors Pursue. This risk is

Key item testing is an example of a technique used when conducting substantive procedures.