The Amount of Direct Testing to Be Performed by the Auditor

question 18

Multiple Choice

The amount of direct testing to be performed by the auditor is inversely related to

• A)audit risk.
• B)enterprise risk.
• C)subjectivity of accounting process.
• D)materiality of account balance.

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Definitions:

Customer's Note

It is a formal promissory note or debt instrument where the customer promises to pay a specific sum of money to the issuer, often used in business as a form of short-term financing.

Bank Statement Adjustment

The process of amending the balance in a company's record of its bank account to match the balance reported on the bank statement, often involving adding or subtracting items like checks or bank charges.

Outstanding Checks

Checks that have been issued and recorded in an entity's accounting system but have not yet been cashed or cleared by the bank.

Bank Statement Adjustment

The process of modifying the balance shown in a bank statement to match the adjusted balance in the ledger accounts, usually due to timing differences in recording transactions.