The Auditor Uses Substantive Tests of Transactions to Gather Evidence

question 25

Multiple Choice

The auditor uses substantive tests of transactions to gather evidence for

• A)balance sheet transactions in a business process
• B)income statement transactions in a business process
• C)income statement accounts in a business process
• D)policies and procedures in a business process

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Definitions:

Fair Value

The financial receipts from a sale of an asset or the liabilities' transfer expense in a transaction that is orderly and involves market participants at the time allocated for measurement.

Equity Method

An accounting procedure used for recording investments in associated companies where the investor has significant influence but not control.

Significant Influence

The capability to engage in the decision-making processes regarding the financial and operational policies of an investee, but without exercising control or shared control over such policies.

Equity in Income

Earnings attributed to a company's investment in other companies, reflecting the share of profits from the investments.