Question

1. In performing the audit of Company A, an auditor picked a sample of recorded payables and
performed the 3-way match testing (matching purchase order issued by the Company, good
received note from the warehouse and invoice from the vendor). This is the most effective
substantive procedure to test for the Existence assertion of Accounts Payable.

A. True B. False

2. An auditor performed the walkthrough and the test of operating effectiveness and did not
identify any exceptions. Does the auditor still need to perform substantive procedures?

A. Yes B. No

3. An auditor performed revenue test work by selecting a sample of transactions and obtaining
various supporting documentation to obtain audit evidence over relevant assertions. This is an example of:

A. Walkthrough B. Test of operating effectiveness C. Substantive analytical D. Test of details

Answer 1

1) ANSWER A. TRUE

Sample Testing useful in case where bulk volume of transactions exist, detailed verification is possible effective to  test existing assertion of accounts payable to verify its validity and correctness

2) ANSWER B. NO

Walkthrough test traces a transaction through accounting system from its origination  to final destination, Test of operating Effectiveness to address risk of material misstatement and verify controls are designed as per objectives, so there is no need to perform substantive procedures in case not identify any exceptions.

3) ANSWER D. TEST OF DETAILS

Test of Details is a procedure in which supporting documents tested to ascertain a true picture of given amount, so, test of details is a test performed to test revenue by obtaining supporting documentation to obtain audit evidence over relevant assertions.