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Questions and Answers
Is substantive testing the most expensive phase of the audit?
Is substantive testing the most expensive phase of the audit?
True (A)
Does the auditor aim to substantiate management's assertion relative to presentation and disclosure of items in the financial statements during substantive testing?
Does the auditor aim to substantiate management's assertion relative to presentation and disclosure of items in the financial statements during substantive testing?
True (A)
Does substantive testing evaluate the effectiveness and efficiency of the information system?
Does substantive testing evaluate the effectiveness and efficiency of the information system?
True (A)
Does the NTE of substantive testing depend on the auditor's assessed level of control risk?
Does the NTE of substantive testing depend on the auditor's assessed level of control risk?
Can an unqualified opinion be issued if the auditor believes that material losses or account misstatements have occurred?
Can an unqualified opinion be issued if the auditor believes that material losses or account misstatements have occurred?
During the substantive testing phase, the auditor only conducts tests of balances.
During the substantive testing phase, the auditor only conducts tests of balances.
The purpose of substantive testing is to obtain sufficient relevant evidence to make a final judgment on the extent of losses or account misstatements.
The purpose of substantive testing is to obtain sufficient relevant evidence to make a final judgment on the extent of losses or account misstatements.
The auditor evaluates the results of substantive testing to determine the extent of losses or misstatements that occurred due to the failure of the information systems function.
The auditor evaluates the results of substantive testing to determine the extent of losses or misstatements that occurred due to the failure of the information systems function.
The NTE of substantive testing remains the same regardless of the assessed level of control risk.
The NTE of substantive testing remains the same regardless of the assessed level of control risk.
An adverse opinion is issued when the auditor concludes that material losses have occurred or the financial statements are materially misstated.
An adverse opinion is issued when the auditor concludes that material losses have occurred or the financial statements are materially misstated.
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Study Notes
Substantive Testing
- Substantive testing is the most expensive phase of the audit.
- The auditor's aim during substantive testing is to substantiate management's assertions regarding presentation and disclosure of items in the financial statements.
- Substantive testing does not evaluate the effectiveness and efficiency of the information system.
- The Nature, Timing, and Extent (NTE) of substantive testing depends on the auditor's assessed level of control risk.
Auditor's Opinion
- An unqualified opinion cannot be issued if the auditor believes that material losses or account misstatements have occurred.
- An adverse opinion is issued when the auditor concludes that material losses have occurred or the financial statements are materially misstated.
Substantive Testing Phase
- During the substantive testing phase, the auditor does not only conduct tests of balances.
- The purpose of substantive testing is to obtain sufficient relevant evidence to make a final judgment on the financial statements.
- The auditor evaluates the results of substantive testing to determine the extent of misstatements, not the failure of the information systems function.
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