Substantive audit procedures are performed so that the auditor may identify
A) deficiencies in the design or operating effectiveness of internal controls.
B) weaknesses in the effectiveness of the client company's audit committee.
C) material misstatements in the client company's financial statements.
D) Calculations and controls that mitigate the risk of fraud.

Question

Quizplus · Accepted Answer

Substantive audit procedures are specifically designed to detect material misstatements in the client company's financial statements. These procedures are performed after the auditor has gained an understanding of the client's internal controls and assessed their risk of material misstatement. The procedures may include testing account balances, transactions, and disclosures, as well as analytical procedures and confirmation with third parties. While the auditor may also identify deficiencies in internal controls during the course of substantive procedures, this is not their primary objective. Similarly, while an effective audit committee can enhance the quality of financial reporting, its weaknesses are not the focus of substantive procedures. Finally, while substantive procedures may also help detect fraud, their primary goal is to identify material misstatements regardless of their cause.

Substantive Audit Procedures Are Performed So That the Auditor May