Question 1

Which of the following substantive tests of cash account balances are always performed?

Accepted Answer

A) Examine the client's bank reconciliations 
B) Test cut-off of cash receipts,cash payments and transfers at year-end 
C) Confirm cash held by others 
D) All of the above

Question 2

The typical procedures performed to search for unrecorded payables are referred to as subsequent payments testing and cut-off testing.

Accepted Answer

A) True 
 B)False

Question 3

Ensuring that accounts payable are stated at the amounts owed at year-end relates to the rights and obligations assertion.

Accepted Answer

A) True 
 B)False

Question 4

Explain how substantive testing is used for prepayments,investments and intercompany balances.

Accepted Answer

The answer of Explain how substantive testing is used for...

Question 5

Ensuring that all property,plant and equipment owned by the entity at year-end are included on the balance sheet relates to which assertion?

Accepted Answer

A) Classification 
B) Rights and obligations 
C) Completeness 
D) Existence

Question 6

When substantive tests performed identify errors or exceptions,the first response is to:

Accepted Answer

A) report the client to ASIC. 
B) qualify the audit report. 
C) understand why the exception or error has arisen. 
D) perform additional substantive testing.

Question 7

Observing the client's stocktake enables the auditor to establish that:

Accepted Answer

A) items belonging to the client are accurately counted and recorded. 
B) count tags,sheets or cards are properly controlled. 
C) the client's personnel are complying with the instructions for stocktakes. 
D) All of the above

Question 8

Existence of trade receivables is usually verified by:

Accepted Answer

A) calculating changes in the receivables balance from one year to the next. 
B) examining copies of sales invoice sent to the client's customers. 
C) sending confirmations to the client's customers. 
D) evaluating the adequacy of the provision for doubtful debts.

Question 9

The additional opportunities for influencing the timing of the work include:

Accepted Answer

A) auditing activity in the period to date. 
B) auditing events occurring prior to year-end. 
C) leveraging off the activities of the internal audit function. 
D) All of the above

Question 10

Investments can be vouched to supporting external documentation such as:

Accepted Answer

A) investment statements from a bank. 
B) shares prices on the stock exchange. 
C) Both a and b 
D) None of the above

Question 11

Auditors usually test for the existence of property,plant and equipment by:

Accepted Answer

A) re-performing depreciation calculations. 
B) physically sighting the assets on the fixed assets register in the first year the client is audited. 
C) vouching to supporting documentation. 
D) performing analytical review procedures.

Question 12

When the assessment of inherent risk and control risk is low,the amount of substantive testing required to reduce the detection risk to an acceptable level is significant.

Accepted Answer

A) True 
 B)False

Question 13

Testing the mathematical accuracy of the cash payment ledger relates to the existence assertion.

Accepted Answer

A) True 
 B)False

Question 14

Explain how auditors evaluate the results of substantive procedures and describe the procedures employed by auditors when the procedures identify errors or exceptions.

Accepted Answer

The answer of Explain how auditors evaluate the results of...

Question 15

The collapse of Worldcom in 2002 caused commentators to question the company's financial reporting practices.Explain the major problems with the company's financial reporting that contributed to the company's collapse.

Accepted Answer

The answer of The collapse of Worldcom in 2002 caused...

Question 16

The timing of substantive testing is dependent on the risk assessment of the significant account in question.

Accepted Answer

A) True 
 B)False

Question 17

Discuss the specific issues that auditors should consider when designing substantive procedures.

Accepted Answer

The answer of Discuss the specific issues that auditors should...

Question 18

The key objective when performing substantive procedures is to determine whether there are material misstatements within an account balance.

Accepted Answer

A) True 
 B)False

Question 19

When trade receivables is a significant account in an entity's balance sheet,the two audit assertions that are considered most important are existence and valuation and allocation.

Accepted Answer

A) True 
 B)False

Question 20

Explain examples of substantive tests of inventory that are always performed.

Accepted Answer

The answer of Explain examples of substantive tests of inventory...

Exam 10: Substantive Testing and Balance Sheet Accounts

Which of the following substantive tests of cash account balances are always performed?

The typical procedures performed to search for unrecorded payables are referred to as subsequent payments testing and cut-off testing.

Ensuring that accounts payable are stated at the amounts owed at year-end relates to the rights and obligations assertion.

Explain how substantive testing is used for prepayments,investments and intercompany balances.

Ensuring that all property,plant and equipment owned by the entity at year-end are included on the balance sheet relates to which assertion?

When substantive tests performed identify errors or exceptions,the first response is to:

Observing the client's stocktake enables the auditor to establish that:

Existence of trade receivables is usually verified by:

The additional opportunities for influencing the timing of the work include:

Investments can be vouched to supporting external documentation such as:

Auditors usually test for the existence of property,plant and equipment by:

When the assessment of inherent risk and control risk is low,the amount of substantive testing required to reduce the detection risk to an acceptable level is significant.

Testing the mathematical accuracy of the cash payment ledger relates to the existence assertion.

Explain how auditors evaluate the results of substantive procedures and describe the procedures employed by auditors when the procedures identify errors or exceptions.

The collapse of Worldcom in 2002 caused commentators to question the company's financial reporting practices.Explain the major problems with the company's financial reporting that contributed to the company's collapse.

The timing of substantive testing is dependent on the risk assessment of the significant account in question.

Discuss the specific issues that auditors should consider when designing substantive procedures.

The key objective when performing substantive procedures is to determine whether there are material misstatements within an account balance.

When trade receivables is a significant account in an entity's balance sheet,the two audit assertions that are considered most important are existence and valuation and allocation.

Explain examples of substantive tests of inventory that are always performed.