Tests of Controls and Substantive Tests of Transactions Are an Important

question 119

Multiple Choice

Tests of controls and substantive tests of transactions are an important determinant of the extent of the auditor's use of tests of details of balances. Which of the following is true?

• A) They are likely to be performed prior to the client's end of the fiscal year.
• B) They are likely to eliminate the need for tests of details of balances.
• C) They are likely to have no impact on the planned tests of details of balances.
• D) They are likely to be used only in the audit of internal control.

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Definitions:

Accounts Payable

The amounts owed by a business to its suppliers or vendors for goods or services received that have not yet been paid for.

Unearned Revenue

Money received by an individual or company for a service or product that has yet to be provided or delivered.

Accounting Equation

The fundamental equation representing the relationship among assets, liabilities, and owner's equity: Assets = Liabilities + Owner’s Equity.

Creditor

An individual or entity that is owed money by another party, often in the context of loaning funds or issuing credit.