Although the Auditor Primarily Adopts a Substantive Approach to the Audit

question 20

Essay

Although the auditor primarily adopts a substantive approach to the audit of cash balances, an understanding of procedures for maintaining accountability over cash is necessary for the design of substantive tests of details. Name and describe the two main procedures for internal control of cash.

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Definitions:

Constant Rate

A fixed percentage or value used in calculations, often assumed in models forecasting growth or decay over time.

Required Rate of Return

The least annual percentage profit that must be earned by an investment to draw interest from companies or individuals into a given security or scheme.

Projected Increase

An estimate or forecast of the amount by which a specific metric, such as revenue or population, is expected to grow over a certain period of time.

Required Return

The minimum rate of return an investor expects or requires from an investment to compensate for its level of risk.