Michael Fernandez Has Decided to Perform Substantive Procedurat a Major

question 31

Multiple Choice

Michael Fernandez has decided to perform substantive procedurat a major retailer. Which one of the following is not a substantive procedure?

• A) re-performing control procedures to test their effectiveness
• B) inspecting documents to verify the dates of the transactions
• C) bank confirmations regarding interest rates on borrowings by client
• D) recalculating an interest expense using confirmed interest rates

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Definitions:

Capital Market History

The study of past changes and developments in capital markets, including trends in interest rates, stock prices, and financial instruments.

Potential Reward

The expected gain or benefit that may be obtained from an investment or action.

Risky Asset

An asset that carries a higher level of financial risk when compared to safer investments, often with the potential for higher returns.

Semi-Strong Efficiency

A form of market efficiency that asserts all public information is already reflected in stock prices, making it impossible to achieve consistently higher returns.