When Evaluating the Planned Level of Substantive Tests for Each

question 4

Multiple Choice

When evaluating the planned level of substantive tests for each significant financial statement assertion, the auditor will consider the evidence obtained from all of the following except:

• A) procedures to understand the business and industry and related analytical procedures that have been completed.
• B) evidence about the effectiveness of internal controls gained while obtaining an understanding of internal controls.
• C) the assessment of detection risk.
• D) the assessment of inherent risk.
• E) evidence of effectiveness of computer control procedures and related manual follow-up.

---

Definitions:

Owners' Equity

The residual interest in the assets of a company after deducting its liabilities, reflecting the capital invested by the owners plus retained earnings.

Preferred Stock

A class of ownership in a corporation with a higher claim on assets and earnings than common stock, often with dividend payment preference.

Deductible Corporate Expense

Expenses that a corporation can subtract from its gross income to reduce its taxable income, according to tax laws.

Stock Dividend

A dividend payment made by a company to its shareholders in the form of additional shares rather than a cash payout.