Chapter 9

Question 1

Substantive procedures

Answer 1

Audit procedures designed to detect material misstatements at the assertion level and to gather evidence to support management assertions

Question 2

Significant risk

Answer 2

An identified and assessed risk of material misstatement that, in the auditors judgment, requires special audit consideration

Question 3

Auditors are required to perform substantive procedures for all ______ ______ that have been identified during the risk assessment phase

Answer 3

Relevant assertions

Question 4

Dual purpose test

Answer 4

Test of controls and substantive test of details to be performed at the same time on the same transaction

Question 5

Assertions about classes of transactions and event

Answer 5

(IS and CF statements)
1. Occurrence
2. Cutoff
3. Completeness
4. Accuracy
4. Classification

Question 6

Assertions about account balances at year-end

Answer 6

(BS accounts)
1. Existence
2. Rights and obligations
3. Completeness
4. Valuation and allocation

Question 7

Assertions about presentation and disclosure

Answer 7

1. Occurrence and rights and obligations
2. Accuracy, valuation, and allocation
3. Completeness
4. Classification and understandability

Question 8

An audit strategy takes a reliance on

Answer 8

Controls approach, substantive approach, or a combination of both

Question 9

Tracing vs Vouching

Answer 9

Tracing: source document to accounting records

Vouching: accounting records to source document

Question 10

Analytical procedures

Answer 10

Evaluations of financial information through analysis of plausible relationships among financial and non financial data

Question 11

Factors that affect the reliability of data to be used for substantive analytical procedures

Answer 11

1. Source of the data (info. from independent sources more reliable)
2. Controls over the data (adequate IC?)
3. Current or prior year testing of data (audit testing more reliable)
4. Comparability of the data

Question 12

Tests of details

Answer 12

Substantive procedures auditors use to test the details of account balances, transactions, and disclosures

Question 13

Roll-forward procedures

Answer 13

When substantive procedures are performed during an interim period auditors must perform roll-forward procedures to update their audit findings from the time of the interim procedures through year-end

Question 14

Forecasting

Answer 14

Accounting estimate.

Forecasting the outcome of a transaction or event, as required by a financial reporting framework

Question 15

Determining fair value

Answer 15

Of a transaction or financial statement item for inclusion in the financial statements, and disclosure in the notes as required by a financial reporting framework

An accounting estimate

Question 16

Estimation uncertainty

Answer 16

The susceptibility of an accounting estimate and related disclosures to an inherent lack of precision in its measurement

Question 17

Net realizable value

Answer 17

The value for which an asset can be sold minus the estimated costs of selling or discarding the asset