chap 13 selecting which types of tests to perform

Question 1

what is the order of the cost of test from lowest to highest cost?

Answer 1

1. substantive analytical procedures 2. risk assessment procedures 3. test of controls 4. substantive test of transactions 5. test of details of balances

Question 2

when do auditors have to develop a sufficiently precise expectation (analytical procedure) to support the account balance (2)?

Answer 2

1. when substantive analytical procedures are the primary evidence for an account balance 2. when substantive analytical procedures are used to reduce tests of details of balances

Question 3

increasing the sample size for the confirmation of A/R is what kind of test?

Answer 3

substantive test of details of balances

Question 4

what is the only test that the audit evidence of physical examination is used for?

Answer 4

test of details of balances

Question 5

what 4 types of audit evidence is used for test of controls?

Answer 5

1. inspection 2. observation 3. inquiries of the client 4. reperformance

Question 6

like tests of controls, what other test only indicates the likelihood of misstatment affecting the dollar value of the FSs?

Answer 6

analytical procedures

Question 7

why do test of details of blances almost always cost the most?

Answer 7

because of the cost of procedures such as sending confirmations and counting inventories

Question 8

if control test deviations are considered to be significant deficiencies or material weaknesses, the auditore should perform substantive tests of transactions or test of details of balances to determine what?

Answer 8

whether material dollar misstatements have actually occurred

Question 9

what type of audit evidence is used for every type of test?

Answer 9

inquiries of the client

Question 10

risk assessment procedures are required in all audits to assess the risk of material misstatement while the other four types of tests are performed in response to what?

Answer 10

the risks identified to provide the basis for the auditors opinion

Question 11

auditors may reperform a control for what 2 reasons?

Answer 11

1. as part of a transaction walkthrough 2. to test a control that is not supported by sufficient documentary evidence

Question 12

what is the only test that the audit evidence of observation is used for?

Answer 12

tests of controls

Question 13

why do substantive tests of transactions cost more than tests of controls that do not include reperformance?

Answer 13

because they often require recalculations and tracings

Question 14

T/F when deciding which type of test to select for obtaining suffiecient appropriate evidence, the cost of evidence is not an important consideration

Answer 14

F

Question 15

what are the two test the audit evidence of recalculation is used for?

Answer 15

substantive test of transactions tests of details of balances

Question 16

why are risk assessment procedures not as costly as other audit tests?

Answer 16

because auditors can easily make inquireis and observations and perform planning analytical procedures. alos examining documents is cheap

Question 17

what 4 types of audit evidence is used for substantive tests of transactions?

Answer 17

1. inspection 2. inquiries of the client 3. reperformance 4. recalculation

Question 18

T/F auditors typically use all 5 types of test when doing an audit of the FSs but certain types bay be emphazed depending on the circumstances

Answer 18

T

Question 19

why are substantive analytical procedures the least costly?

Answer 19

because of the relative ease of making calculations and comparison

Question 20

if auditors assess control risk below the maximum, they must do what?

Answer 20

perform tests of controls to determine whether the assessed level of control risk is supported

Question 21

which tests do auditors try and plan to minimize their use?

Answer 21

test of details of balances

Question 22

what 6 types of audit evidence is used for tests of details of balances?

Answer 22

1. physical examination 2. confirmation 3. inspection 4. inquiries of the client 5. reperformance 6. Recalculation

Question 23

the auditors understanding of internal control performed as part of risk assessment procedures provides the basis for the auditor’s what?

Answer 23

initial assessment of control risk

Question 24

what is the only test that the audit evidence of analytical procedures is used for?

Answer 24

substantive analytical procedures

Question 25

which test has 6 of the 8 types of audit evidence available

Answer 25

tests of details of balances

Question 26

auditors are most liekly to believe material dollar misstatements exist in the FSs when control test deviations are considered to be what (2)

Answer 26

1. significant deficiencies 2. material weaknesses

Question 27

what is the difference between an exception in a test of control and an exception in a substantive test of transactions or a test of details of balances?

Answer 27

exception in test of control- indicates the likelihood of misstatements affecting the dollar value of the FSs exception in the 2 substantive tests= is a FS misstatement

Question 28

verifying prices, extensions, and footings are what kinds of tests?

Answer 28

substantive tests of transactions

Question 29

what is the only test that the audit evidence of reperformance is not used for?

Answer 29

substantive analytical procedures

Question 30

only test of the details of balances involve which 2 types of audit evidence

Answer 30

physical examination confirmation

Question 31

what are 4 factors that influence the auditors choice of the types of tests to select?

Answer 31

1. the availability of the eight types of evidence 2. the relative costs of each type of test 3. the effectiveness of internal controls 4. inherent risks

Question 32

auditors often limit their tests to substantive analytical procedures if they conclude the accounts are reasonably stated for what kinds of accounts (2)?

Answer 32

1. those with small balances 2. those with only minimal potential for material misstatments

Question 33

if tests of control support the control risk assessment, what 2 things happen?

Answer 33

1. planned detection risk in the audit risk model is increased 2. planned substantive tests can be reduced

Question 34

what is the only test that the audit evidence of confirmation is used for?

Answer 34

test of details of balances

Question 35

how can auditors poerform a large number of tests of controls quickly?

Answer 35

using audit software

Question 36

exceptions in test of controls are called ?

Answer 36

control test deviations

Question 37

what 2 types of audit evidence is used for substantive analytical procedures?

Answer 37

1. inquiries of the client 2. analytical procedures

Question 38

T/F even with maximum reliance on controls, some substantive procedures are still required in an audit of FSs

Answer 38

T

Question 39

what is the only test that the audit evidence of inspection is not used for?

Answer 39

substantive analytical procedures

Question 40

what are the only two tests performed in the audit of internal control over financial reporting?

Answer 40

1. risk assessment procedures 2. tests of controls

Question 41

why are test of controls more costly relative to the auditors risk assment procedures?

Answer 41

because of the greater extent of testing required to obtain evidence that a control is operating effectively especially when involving reperformance

Question 42

when dealing with reperformance and recalculation tests, when do auditors perform them?

Answer 42

1. since they need to do some of them anyway they might do them as part of the original tests of controls 2. they might do them after they know the results of the tests of controls and then determine the total sample size needed