17:56 22/09/2023 ASSURANCE & AUDITING - SUBSTANTIVE PROCEDURES

ASSURANCE & AUDITING -

SUBSTANTIVE PROCEDURES
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Which of the following is a substantive audit procedure for wages and 1 điểm

salaries?

A Inspect a sample of clock cards for evidence of authorization by a responsible

official

B Recalculate a sample of payroll deductions such as employment taxes to confirm

accuracy

C Attempt to access and make changes to the payroll master file using the log on
for a junior clerk

Which of the following statements is/are true regarding direct confirmation 1 điểm
of accounts receivable?
(1) Responses from the customer must be returned directly to the client.

(2) Under the positive method the customer only replies if the amount stated
is agrees with the customer's records.

A (1) only

B (2) only

C (1) and (2)

D Neither (1) nor (2)

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17:56 22/09/2023 ASSURANCE & AUDITING - SUBSTANTIVE PROCEDURES

Julia, an audit junior, has been asked to test the completeness of certain 1 điểm
items in the income statement. He has carried out the following test.
For the following test, seclect whether that test proves the assertion of
completeness or not: Tracing a sample of entries on the payroll to individual
HR records

Proves completeness

Does not prove completeness

Which TWO of the following are reasons why sales are of verified by testing 1 điểm
the internal controls in place over sales?

There are usually too many individual transactions to test them individually

Sales constitute a high volume of similar transactions which are suitalbe for controls
testing

Controls over sales in a company are often strong

Because there are so many individual transactions, there is a significant risk that
sales are misstated

Which ONE of the following assertions is the assurance provider LEAST 1 điểm
concerned with when testing a non-current asset balance?

Existence

Rights and obligations

Completeness

Cut-off

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17:56 22/09/2023 ASSURANCE & AUDITING - SUBSTANTIVE PROCEDURES

Which of the following financial statement assertions will be supported by a 1 điểm

sample check on the numerical sequence of despatch notes and invoices

Allocation

Occurrence

Completeness

Valuation

The auditor of ABC Co is performing audit procedures to confirm the 1 điểm

company's ownership of motor vehicles. Which of the following would

provide the most persuasive evidence of this?

A Physical inspection of the motor vehicles

B Inspection of vehicle registration documents

C Checking that the motor vehicles are recorded in the non-current asset register

D Review of vehicle insurance documentation

Which TWO of the following procedures are MOST appropriate to confirm the 1 điểm
valuation of trade receivables?

Review of the receivables ledges

Direct confirmations with customers

Review of cash paid after date

Review of sales invoices

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17:56 22/09/2023 ASSURANCE & AUDITING - SUBSTANTIVE PROCEDURES

Which of the following assertions about classes of transactions and events 1 điểm
for the period under audit is defined below: 'Amounts and other data relating
to recorded transactions and events have been recorded appropriately'.

A Cut-off

B Accuracy

C Occurrence

D Classification

Which of the following substantive procedures provides evidence over 1 điểm

the existence of non-current assets?

A Select a sample of assets included in the non-current asset register and

physically verify them at the client premises

B Review the repairs and maintenance expense account to identify any items of a
capital nature

C For assets disposed of, agree the sale proceeds to supporting documentation and
cash book

Is the following statement regarding audit evidence true or false? 1 điểm

Appropriateness is the measure of the quality of audit evidence.

True

False

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17:56 22/09/2023 ASSURANCE & AUDITING - SUBSTANTIVE PROCEDURES

Which of the following is NOT a responsibility of the auditor 1 điểm

A To provide an opinion on the truth and fairness of the financial statements

B To conduct an audit in accordance with International Standards on Auditing

C To express an opinion on the company’s going concern status

Julia, an audit junior, has been asked to test the completeness of certain 1 điểm

items in the income statement. He has carried out the following test.
For the following test, seclect whether that test proves the assertion of
completeness or not: Tracing a sample of goods rececived notes to payables
ledger and financial statements.

Proves completeness

Does not prove completeness

Which TWO of the following substantive procedures provide evidence over 1 điểm
the existence of trade receivables?
(1) Agreeing a sample of goods despatched notes to sales invoices and to
the sales ledger

(2) Undertaking a receivables circularisation

(3) Review of post year-end cash receipts, if these relate to year-end

receivables follow through to the sales ledger

(4) Recalculating the allowance for uncollectible accounts

A 1 and 3

B 2 and 4

C 2 and 3

D 1 and 4

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17:56 22/09/2023 ASSURANCE & AUDITING - SUBSTANTIVE PROCEDURES

The auditor of M Co has agreed a sample of non-current assets selected by 1 điểm

physical inspection back to the non-current asset register. For which of the
following assertions does this test provide assurance?

A Completeness

B Existence

C Rights and obligations

D Accuracy and valuation

Which TWO of the following assertions is the auditor most conserned with 1 điểm

when testing property, plant and equipment?

Occurrence

Existence

Classification

Rights and obligations

Accuracy

Two types of procedures used in gathering evidence are test of controls and 1 điểm

substantive procedures.
Select the type of procedure illustrated: Observing an organisation's despatch
procedures

Test of control

Substantive procedure

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17:56 22/09/2023 ASSURANCE & AUDITING - SUBSTANTIVE PROCEDURES

Julia, an audit junior, has been asked to test the completeness of certain 1 điểm
items in the income statement. He has carried out the following test.
For the following test, seclect whether that test proves the assertion of
completeness or not: Analytical procedures on revenue figures, budget v
actual and actual current year v actual previous year.

Proves completeness

Does not prove completeness

Which THREE of the following are reasons why the auditors might seek direct 1 điểm

confirmation of balance due from suppliers?

To obtain third party evidence

The auditors suspect that the client is intentionally understated payables

The internal controls relating to purchases are weak

Supplier statements are unavailbes

Which of the following techniques is generally accepted to be the most 1 điểm

efficient to obtain evidence regarding the existence of bank balances?

A Reperformance

B Confirmation

C Analytical procedures

D Observation

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17:56 22/09/2023 ASSURANCE & AUDITING - SUBSTANTIVE PROCEDURES

Which of the following describes how an assurance provider would check the 1 điểm

existence assertion for a non-current asset?

Trace the physical item to the non - current asset register

Trace the physical item to the financial statements

Trace an entry in the non - current asset register to the physical item

Trace an entry in the non-current asset register to the financial statements

Trace an entry in the financial statements to the physical item

Which of the following procedures should be undertaken to confirm the 1 điểm

existence of cash at bank?

Inspecting the bank reconciliation statement prepared by the client

Agreeing the figures on the bank reconciliation to the bank column in the cash book

Obtaining direct confirmation of the bank balance from the client's bank

Reperforming the additions on the bank reconciliation

Smith is considering the preliminary audit strategy for the following new 1 điểm

audit clients whose principal characteristic are set out below.

Select whether Smith would be likely to rely on internal controls or to rely
completely on substantive procedures: Client A has recently been
incorporated and is experiencing rapid growth. It is in the process of
recruiting a financial controller

Rely on internal controls

Rely completely on substantive procedures

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17:56 22/09/2023 ASSURANCE & AUDITING - SUBSTANTIVE PROCEDURES

Which of the following is the key assertion with which auditors are concerned 1 điểm
in relation to payables?

Completeness

Existence

Accuracy

Disclosure

Smith is considering the preliminary audit strategy for the following new 1 điểm
audit clients whose principal characteristic are set out below.
Select whether Smith would be likely to rely on internal controls or to rely
completely on substantive procedures: Client B is an established company
with well - documented systems and controls. It has an internal audit
function whose principal activity is to monitor the implementation and
effectiveness of existing controls

Rely on internal controls

Rely completely on substantive procedures

As the audit senior on the year-end audit of ABC Co, you have instructed the 1 điểm
audit junior to obtain and inspect supporting sales contracts for large sales
transactions. Which of the following assertions are you seeking to test with
this audit procedure?

A Cut-off

B Accuracy

C Occurrence

D Completeness

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17:56 22/09/2023 ASSURANCE & AUDITING - SUBSTANTIVE PROCEDURES

Peter, an auditor junior, has carried out the following tests to verify the 1 điểm

valuation of inventory in the financial statements of ABC plc.

Select whether the test proves the assertion of valuation or not: Attending
the inventory count and carrying out sample counts on a number of items

Proves valuation

Does not prove valuation

Which of the following audit procedures would provide the auditor with 1 điểm
evidence of completeness of inventory?

A Tracing test counts performed at the inventory count to the detailed inventory
listing

B Reviewing the physical condition of inventory when attending the inventory count

C Casting the inventory listing

D Vouching the cost of a sample of inventory items to suppliers' invoices

Direct confirmation of trade receivables provides evidence in respect of 1 điểm

which TWO of the following assertions?

Existence

Valuation

Rights and obligations

Completeness

Occurrence

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17:56 22/09/2023 ASSURANCE & AUDITING - SUBSTANTIVE PROCEDURES

Seclect which financial statement assertion would be affected: Inventory 1 điểm

items were excluded from the total in the financial statements in error

Completeness

Valuation

Cut - off

Two types of procedures used in gathering evidence are test of controls and 1 điểm

substantive procedures.
Select the type of procedure illustrated: Comparing this year's sales figures to
those of previous years

Test of control

Substantive procedure

Which two of the following would be classified as substantive procedures? 1 điểm

(1) Tests of control

(2) Walk-through tests

(3) Analytical procedures

(4) Tests of details

A (1) and (2)

B (1) and (4)

C (2) and (3)

D (3) and (4)

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17:56 22/09/2023 ASSURANCE & AUDITING - SUBSTANTIVE PROCEDURES

Two types of procedures used in gathering evidence are test of controls and 1 điểm
substantive procedures.
Select the type of procedure illustrated: Examining the instructions issued by
an organisation for its year-end physical inventory count

Test of control

Substantive procedure

Which TWO of the following procedures would provide evidence of rights and 1 điểm
obligations of motor vehicles?

Vouching a sample of motor vehicles in the asset register to regitration documents

Physical inspection of motor vehicles

Review of purchase invoices for motor vehicles acquired in the period

Confirmation that calculations on the non-current asset schedule are correct in

respect of motor vehicles

Seclect which financial statement assertion would be affected: Due to the 1 điểm
miscalculation of cost, some inventory items have been included at cost
when net realisable value is lower.

Completeness

Valuation

Cut - off

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17:56 22/09/2023 ASSURANCE & AUDITING - SUBSTANTIVE PROCEDURES

Which ONE of the following is the reason why the positive method of 1 điểm
confirming receivables balances with customers is generally preferred?

It is carried out in the auditor's names

It requires the customer to reply giving or confirming or disagreeing with the balance

It only requires the customer to reply if he disagrees with the balance

It requires replies to be sent to the client

Which of the following statements is/are true with respect to analytical 1 điểm
procedures?
(1) Analytical procedures can be used throughout the audit.

(2) Analytical procedures must be used as risk assessment procedures.

A (1) only

B (2) only

C (1) and (2)

D Neither (1) nor (2)

Peter, an auditor junior, has carried out the following tests to verify the 1 điểm

valuation of inventory in the financial statements of ABC plc.

Select whether the test proves the assertion of valuation or not: Comparing
cost in a number of inventory items to sales invoices subsequent to the year
end

Proves valuation

Does not prove valuation

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17:56 22/09/2023 ASSURANCE & AUDITING - SUBSTANTIVE PROCEDURES

Is the following statement regarding direct confirmation of accounts 1 điểm

receivable true or false? The verification of trade receivables by direct

confirmation provides evidence that the debts are recoverable.

True

False

Which of the following NOT should be included in an audit engagement 1 điểm

letter?

a) Objective and scope of the audit

b) Results of previous audits

c) Management’s responsibilities

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