A Substantive Procedure Is Used to

question 42

Multiple Choice

A substantive procedure is used to

• A)assess the likelihood of material misstatement in the financial statements.
• B)obtain an understanding of internal controls.
• C)analyze the account balance to see if there are potential errors.
• D)quantify the amount of potential error in an account or transaction stream.

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Definitions:

Indirect Materials

Indirect materials are supplies used in the production process but not directly traceable to individual goods or services.

Job Cost Sheets

Documents that track the direct materials, direct labor, and manufacturing overhead for a specific job in a manufacturing process.

Time Tickets

Documents used to record the amount of time an employee spends on various tasks, often used for payroll or job costing.

Direct Labor

The wages and related benefits of employees who are directly involved in the production of goods or services.