Overview of Substantive Procedures

Question 1

What is the only component of the audit risk model that the auditor controls?

Answer 1

Detection risk

Question 2

Performing analytical procedures may serve what three purposes?

Answer 2

1. )Audit planning (required)
2. )As a form of substantive evidence (not required)
3. )Final review (required)

Question 3

List the two broad categories of substantive procedures

Answer 3

1. )Tests of details

2. )Substantive analytical procedures

Question 4

Define “analytical procedures.”

Answer 4

Evaluations of financial information through analysis of plausible relationships among both financial and non financial data

Question 5

Identify the two categories of substantive tests of details.

Answer 5

1. )Tests of ending balances

2. )Tests of transactions

Question 6

Identify the four considerations that determine the effectiveness and efficiency of analytical procedures used for substantive purposes.

Answer 6

1. )Nature of the assertion
2. )Plausibility and predictability of the relationship
3. )Availability and reliability of data
4. )Precision of the expectation

Question 7

How might the auditor’s decisions about the extent of audit procedures lower detection risk?

Answer 7

Increasing the sample sizes for audit testing will lower detection risk.

Question 8

How might the auditor’s decisions about the timing of audit procedures lower detection risk?

Answer 8

Moving the auditor’s important substantive procedures away from an interim date (before year-end) to year-end will lower detection risk.

Question 9

How might the auditor’s decisions about the nature of audit procedures lower detection risk?

Answer 9

Choosing audit procedures that provide a stronger basis for conclusions will lower detection risk.