In a Financial Report Audit, Substantive Tests Are Audit Procedures

question 48

Multiple Choice

In a financial report audit, substantive tests are audit procedures that:

• A) a re designed to discover significant subsequent events.
• B) may be either tests of transactions, tests of balances, tests of disclosure or analytical procedures.
• C) will decrease proportionately with the auditor's assessed level of control risk.
• D) may be eliminated under certain conditions.

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Definitions:

Accounts Payable

Liabilities of a business that represent amounts owed to creditors for goods and services received but not yet paid for.

Sunk Costs

Expenses that have already been incurred and cannot be recovered, which should not affect future business decisions.

Capital Budgeting

The process by which a business evaluates and selects long-term investments that are expected to yield returns over a period of time longer than one year.

Market Study

A comprehensive analysis of a market within a specific industry, including factors like competition, customer preferences, and potential for growth.