Substantive Tests Must Be Designed to Tests Specific Audit Objectives

question 79

Multiple Choice

Substantive tests must be designed to tests specific audit objectives.
REQUIRED: For the following specific audit procedures, indicate the assertion that is being tested. Use the following letters, placing your response in the space provideD.
-Select high dollar items from the perpetual inventory records for
inspection/counting during the physical inventory.

• A)Existence or occurrence
• B)Completeness
• C)Valuation or allocation
• D)Rights and obligations
• E)Presentation and disclosure

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Definitions:

Premium

The amount paid for an option or insurance policy above its intrinsic value or the amount that an asset's selling price is above its face value.

Gross Profit

The difference between sales revenue and the cost of goods sold before deducting overhead, payroll, taxation, and interest payments.

Option Contract

A financial contract that gives the holder the right, but not the obligation, to buy or sell an underlying asset at a specified price on or before a specified date.

At The Money

Describes an option where the current price of the underlying asset is equal to the strike price of the option.