While Substantive Procedures May Support the Accuracy of Underlying Records

question 45

Multiple Choice

While substantive procedures may support the accuracy of underlying records, these tests frequently provide no affirmative evidence of segregation of duties because:

• A)substantive procedures rarely guarantee the accuracy of the records if only a sample of the transactions has been tested.
• B)the records may be accurate even though they are maintained by persons having incompatible functions.
• C)substantive procedures relate to the entire period under audit, but compliance tests ordinarily are confined to the period during which the auditor is on the entity's premises.
• D)many computerized procedures leave no audit trail of who performed them, so substantive procedures may necessarily be limited to inquiries and observation of office personnel.

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Definitions:

Journal Entries

The method used to record all transactions in an accounting system, ensuring that credits and debits are balanced.

Financial Statement

Documents that report on a company's financial performance, position, and cash flows, providing insights to stakeholders about its financial health.

Bad Debt Expense

An expense recorded by businesses to account for invoices that are unlikely to be paid by customers.

Current Assets

Assets that are expected to be converted into cash, sold, or consumed within a year.