ExpertHard1 markMultiple Choice
CPA · Question 72 · Area III: Procedures
Which of the following is a 'substantive procedure'?
Which of the following is a 'substantive procedure'?
Answer options:
A.
Inspecting evidence of authorization on purchase orders.
B.
Observing the segregation of duties in the mailroom.
C.
Confirming account balances with customers.
D.
Reviewing the entity's flowchart of the sales cycle.
How to approach this question
Substantive = $, Numbers, Balances. Control = Process, Authorization, Signatures.
Full Answer
C.Confirming account balances with customers.✓ Correct
Confirming account balances with customers.
Substantive procedures are designed to detect material misstatements at the assertion level (dollar errors). Confirmation of balances directly tests the dollar amount (Existence/Valuation). The other options test the internal control process.
Common mistakes
Confusing Tests of Controls with Substantive Tests.
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