An Auditor Plans to Apply Substantive Tests to the Details

question 30

Multiple Choice

An auditor plans to apply substantive tests to the details of asset and liability accounts as of an interim date rather than as of the balance sheet date. The auditor should be aware that this practice

• A) Eliminates the use of certain statistical sampling methods that would otherwise be available.
• B) Presumes that the auditor will reperform the tests as of the balance sheet date.
• C) Should be especially considered when there are rapidly changing economic conditions.
• D) Potentially increases the risk that errors which exist at the balance sheet date will not be detected.

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Definitions:

Production Possibilities Curve

A graphical representation that shows the maximum combination of goods and services that can be produced by an economy, given its available resources and technology.

Productive Efficiency

A situation in which an economy or production system cannot produce more of one good without reducing the output of another good, indicating optimal production resource usage.

Capital Goods

Assets owned by companies for an extended period, instrumental in manufacturing products and providing services, including items like equipment, machinery, and buildings.

Consumer Goods

Products intended for final use by consumers rather than further manufacturing or processing.