CAF-8 · Chapter 7 · Question 1 of 10
Under ISA 520, which of the following is an essential feature of applying substantive analytical procedures?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) Developing an expectation of recorded amounts or ratios and evaluating whether that expectation is sufficiently precise to identify a misstatement.
Explanation
A core requirement of ISA 520 is that the auditor must develop an independent expectation of a figure or ratio, and assess whether that expectation is precise enough to flag a material misstatement when compared to the client's actual recorded figures.
More Introduction to Substantive Procedures MCQs
- Q3An auditor compares a client's current year gross profit margin of 45% against the prior year's margin of 28%. The client has not…
- Q4A junior auditor attempts to use substantive analytical procedures to predict the client's total rental expense for the year. He applies a…
- Q5When assessing the reliability of data from which an expectation is developed for analytical procedures, which of the following provides…
- Q6A client's trade payable days have drastically decreased from 55 days in the prior year to 25 days in the current year, despite no changes…
- Q7An auditor identifies a massive increase in revenue just prior to the year-end, but a subsequent analytical review shows the receivables…