Assertions and Types of Audit Procedures

Question 1

Audit Procedures for Obtaining Evidence

Answer 1

The auditor’s basis for conclusion is comprised of three categories of procedures:

1) Risk assessment procedures
2) Tests of controls
3) Substantive procedures

Question 2

Risk Assessment Procedures

Answer 2

The audit procedures performed to obtain an understanding of the entity and its environment, including the entity’s internal control, to identify and assess the risks of material misstatement, whether due to fraud or error, at the financial statement and relevant assertion levels.

Question 3

Test of control

Answer 3

An audit procedure designed to evaluate the operating effectiveness of controls in preventing, or detecting and correcting, material misstatements at the assertion level.

Question 4

Substantive Procedures

Answer 4

An audit procedure designed to detect material misstatements at the assertion level. Substantive procedures comprise (a) tests of details (classes of transactions, account balances, and disclosures) and (b) substantive analytical procedures.

Question 5

The Auditor Should Plan and Perform Substantive Procedures

Answer 5

The auditor should design the substantive procedures to be responsive to the assessed risks of material misstatements. The purpose of substantive procedures is to detect material misstatements at the relevant assertion level.

Question 6

Performing substantive procedures at an interim date

Answer 6

Increases detection risk

Question 7

Auditor verifying that segregation of duties exists and is operating effectively is a

Answer 7

Tests of control