Substantive Tests Must Be Designed to Tests Specific Audit Objectives

question 16

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.
-Ascertain that the financial statements comply with the industry practice of
presenting a classified balance sheet.

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

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Definitions:

Duty of Loyalty

is an ethical and legal obligation requiring individuals, often corporate directors or employees, to act in the best interest of their company or employer, avoiding conflicts of interest.

Duty of Care

A legal obligation imposed on individuals or entities requiring adherence to a standard of reasonable care to prevent harm to others.

Illegal Dividends

Dividends distributed by a company despite it not having sufficient profits or legally available capital, violating corporate law or its own articles of incorporation.

Shareholder's Derivative Suit

A legal action brought by shareholders on behalf of a corporation to enforce or defend its rights when the corporation's management fails to do so.