Shown Below (1-5)are the Five Types of Tests Which Auditors

question 8

Multiple Choice

Shown below (1-5) are the five types of tests which auditors use to determine whether financial statements are fairly stated.Which three are substantive tests?
1) procedures to obtain an understanding of internal control
2) tests of controls
3) tests of transactions
4) analytical procedures
5) tests of balances

• A) 2, 3 and 4
• B) 1, 2 and 3
• C) 3, 4 and 5
• D) 2, 3 and 5

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Definitions:

Retained Earnings

The portion of net income that is not distributed to shareholders as dividends but is kept by the company to reinvest in its core business or to pay debt.

Liability Account

An accounting record that captures the amounts a company owes to creditors.

Creditors

Creditors are individuals or entities to whom a company owes money for goods or services that have been provided.