When Planning a Sample for a Substantive Test of Balances

question 14

Multiple Choice

When planning a sample for a substantive test of balances, an auditor should consider tolerable misstatement for the sample.This consideration should:

• A) not be changed during the audit.
• B) be related to preliminary judgments about materiality levels.
• C) not be adjusted for qualitative factors.
• D) be related to the auditor's business risk assessment.

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Definitions:

Interest

The cost of borrowing money, typically expressed as a percentage of the principal, paid by the borrower for the use of lender’s funds.

Compounded Interest

Interest that is computed on both the original amount of money and the interest it has already earned over past periods, whether it’s a savings or a loan.

Investments

Assets or items acquired with the intention of generating income or appreciating in value over time.

Annually

Occurring once every year; relating to a period or cycle of one year.