No. 125 Brgy.

San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : [email protected]

AT.06.09 – Evidence and Performance of Substantive Testing

1. Which of the following best describes the purpose of substantive procedures?

a. To obtain an understanding of the entity and its environment, including its
internal control, to identify and assess the risk of material misstatements at
the financial statements and assertion level.
b. To test the operating effectiveness of controls at the assertion level.
c. To detect material misstatements at the assertion level.
d. All of the above.

2. Which of the following factors below has a direct relationship with the quantity of
evidence to be gathered by the auditor during the substantive test phase?
Risk of Material Confidence Control Risk Materiality
Misstatements Level Assessment Threshold
a. Yes Yes No Yes
b. Yes Yes Yes No
c. Yes Yes Yes Yes
d. No Yes No No

3. Which of the following information is used by the auditor as evidence when

concluding about the financial statements?
a. Underlying accounting records
b. Other information
c. Both A and B.
d. Neither A nor B.

4. Statement 1: There is an inverse relationship between the quality of audit evidence

and the quantity of evidence to be gathered; the higher the quality of audit
evidence, less may be required.
Statement 2: In identifying the relevance of audit evidence, the auditor takes into
consideration the purpose of the audit procedure, the assertion/s tested, and the
direction of the testing.
a. True, True
b. True, False
c. False, True
d. False, False

5. The sufficiency and appropriateness of audit evidence gathered ultimately

depends on
a. Client’s management.
b. Client’s audit committee.
c. Auditor’s professional judgment.
d. Prevailing laws and regulations.

6. Which type of audit assertion is defined by the objective – “assets, liabilities, and
equity interests are included in the financial statements at appropriate amounts
and any adjustments are appropriately recorded”?
a. Accuracy
b. Existence
c. Valuation and allocation
d. Rights and obligations

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JABELLAR/AIBAY/AJABINAL/RBERCASIO/JMAGLINAO/ASARMIENTO
 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : [email protected]

7. It refers to the process of obtaining a representation of information or of an existing

condition directly from a third party.
a. Inquiry
b. External confirmation
c. Observation
d. Reperformance

8. Anne, associate auditor of LGP and Co. is tasked to identify unsupported sales
transactions included in the sales balance. From which of the following should she
start her testing?
a. Entries in the accounting records
b. Sales Invoices
c. Shipping documents
d. Sales orders

9. The difference between test of details of transactions, account balances, and

disclosures and substantive analytical procedures is
a. Test of details is always required to be performed.
b. Substantive analytical procedures is always required to be performed.
c. The auditor selects a large sample size for substantive analytical
procedures in FS areas that are of high risk of material misstatements.
d. Test of details of transactions is best used when testing accounts with a
large volume of small-value transactions.

10. Holding other planning considerations equal, a decrease in the amount of

misstatements in a class of transactions that an auditor could tolerate most likely
would cause the auditor to:
a. Perform the planned auditing procedures closer to the balance sheet date.
b. Increase the assessed level of control risk for relevant financial statement
assertions.
c. Perform less effective procedures.
d. Decrease the extent of auditing procedures to be applied to the class of
transactions.

11. Which of the following accounts is most likely tested using test of transactions and
events approach?
a. Cash
b. Purchases
c. Investment in equity securities
d. Accounts Receivable

12. Which of the following is the least effective procedure in verifying the completeness
of data provided to the auditor?
a. Obtaining screenshots of the parameters set in the accounting system prior
to extracting data.
b. Checking numerical totals and reconciling with related account balance in
the general ledger.
c. Comparing transaction totals and volume with prior year data.
d. Obtaining a sample transaction prior to the first record and subsequent to
the last record of the data extracted.

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JABELLAR/AIBAY/AJABINAL/RBERCASIO/JMAGLINAO/ASARMIENTO
 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : [email protected]

13. An auditor assesses the control risk of an audit client at maximum level because
of fraud indicators and management override. Which of the following types of
confirmation is most likely applicable in this situation?
a. Blank positive confirmation
b. Positive confirmation with information already included
c. Negative confirmation
d. All of the above.

14. When the auditor has no reason to believe that recipients of the confirmation
requests will disregard such requests, the auditor uses _________.
a. Positive confirmation
b. Negative confirmation
c. Either A or B.
d. Neither A nor B.

15. The difference between analytical procedures performed as part of substantive

tests and those performed during risk assessment procedures is that
a. Substantive analytical procedures are always required.
b. Preliminary analytical procedures are always required.
c. Substantive analytical procedures are performed at the FS level, while
preliminary analytical procedures are performed at the assertion level.
d. The auditor considers significant differences only during the substantive
testing phase.

16. An auditor obtained an understanding of an audit client’s internal controls and

determined its design and implementation to be effective. However, the auditor still
chose to establish his/her own control risk assessment at a maximum level. Which
of the following is most appropriate statement?
a. The class of transactions and events or account balance consists of a large
volume of transactions with individually small amounts.
b. The transactions are processed uniformly through automation.
c. The class of transactions and events may be from a new source for the
accounting period and has a relatively low volume of transactions.
d. The inherent risk component is very high that controls are not expected to
be enough to address the risk of material misstatements.

17. Performance of audit procedures at an interim date causes the risk of material
misstatement occurring between the interim date and the end of the year to
a. Decrease
b. Increase
c. Remain the same
d. Become more difficult to ascertain

18. Evidence is usually more persuasive for balance sheet accounts when it is
obtained:
a. Only from transactions occurring on the balance sheet date.
b. As close to the balance sheet as possible.
c. From various times throughout the client’s year.
d. From the time period the transactions in that account were most numerous
during the calendar year.

19. This type of procedure is not required to be performed by the auditor, but may also
serve as a reliable source of audit evidence in certain situations.

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 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : [email protected]

a. Preliminary analytical procedures

b. Substantive analytical procedures
c. Concluding analytical procedures
d. All of the above are required to be performed by the auditor.

20. Evidence is usually more persuasive for income statement accounts when it is
obtained:
a. Only from transactions occurring on the balance sheet date.
b. As close to the balance sheet as possible.
c. From various times throughout the client’s year.
d. From the time period the transactions in that account were most numerous
during the calendar year.

21. The auditor’s objective in attending the physical inventory count is most likely to
test
a. The valuation of existing inventory
b. The existence and condition of inventory
c. The ownership and control over inventory
d. The cut-off for year-end inventory transactions

22. When gathering evidence on accounting estimates and fair value measurement,
the auditor’s objective is to test whether the accounting estimates are
a. Supported by past experience
b. Reasonable in the circumstances
c. Similar to competitors and other comparable information
d. Supported by reports from appraisers or experts

23. When performing analytical procedures, the more disaggregated the data used for
establishing the auditor’s expectation is, the __________ reliable the established
expectation becomes.
a. More
b. Less
c. More or less, depending on availability.
d. Cannot be determined.

24. When testing revenue transactions, which of the following type of procedures
is/are likely to cover 100% of the population?
a. Test of details
b. Substantive analytical procedures
c. Both A and B
d. Neither A nor B

25. In addressing the risks of material misstatements on accounting estimates, the

auditor may obtain evidence through which of the following approaches?
a. Understanding and testing how management made the accounting
estimate.
b. Developing an auditor’s estimate or range.
c. Obtaining evidence of subsequent transactions confirming the estimate.
d. All of the above.
*End of Handout*

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