In a Nonstatistical Substantive Test of Transactions for an Income

question 26

Multiple Choice

In a nonstatistical substantive test of transactions for an income statement account,the auditor decides that sales revenue is materially misstated.In this case,the auditor might

• A)investigate the misstatements in the account and recommend corrections
• B)ask the client to investigate the misstatements in the account and correct them
• C)increase the sample size and perform additional tests to identify the amount of the total misstatement in the income statement
• D)increase the sample size and perform additional tests to reduce the amount of the total misstatement in the account
• E)increase the sample size and perform additional tests to identify the amount of the total misstatement in the account
• F)both A and B
• G)both C and D
• H)Both B and E

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Definitions:

Actual Interest Rate

The real rate of interest earned or paid on an investment, loan, or other financial product, taking into account the effects of compounding.

Non-Interest-Bearing Note

A financial instrument or promissory note that does not accrue interest over time, meaning the borrower repays only the principal amount.

Discount Rate

The interest rate charged to commercial banks and other financial institutions for loans received from a country's central bank.

Actual Interest Rate

The actual rate of interest earned or paid on an investment or loan, considering compounding and other factors, as opposed to the nominal rate.