CPA AUD AUDIT EVIDENCE COLLECTION
AND SUBSTANTIVE PROCEDURES
PRACTICE EXAM ITEMS ANSWERS
FIELDWORK AND DOCUMENTATION
REVIEW 2026
◉ Materiality
Answer: Professional judgment about whether or not a
misstatement could reasonable influence the economic decision of
users as a group.
◉ Planning Materiality
Answer: Defined at three levels for planning purposes. Financial
Statement level, account balances, and classes of transactions.
◉ Performance Materiality
Answer: Set by auditor at less than the materiality for the
statements as a whole. It is an adjustment to reduce to an
appropriately low level the probability that the sum of uncorrected
and undetected misstatements exceeds the applicable materiality.
◉ Misstatements
,Answer: The auditor should consider uncorrected misstatements
and accumulate identified misstatements.
◉ Types of Misstatements
Answer: Factual (Real, no doubt)
Judgmental Misstatements (unreasonable accounting estimate or
inappropriate accounting policy)
Projected (auditor estimate of the misstatements in the populations
based on audit samples)
◉ Analytical Procedures
Answer: Studies plausible relationships among financial and
nonfinancial data. Develop an expectation and compare to
management balance. Can be used as risk assessment (planning) or
as a substantive procedure to eliminate the need for substantive
tests of details in a low risk account.
◉ Five Sources of Information for Analytical Procedures
Answer: 1. Financial Information from Comparable Prior Periods
2. Anticipated Results
3. Relationships among Elements of Financial Information (ex. Sales
and A/R should increase/decrease by similar amounts)
4. Comparable information from client's industry
,5. Relationships between financial and relevant nonfinancial
information (Ex. # of hours worked and labor cost)
◉ When are analytical procedures alone enough?
Answer: When tests of details may not indicate a potential
misstatement (ex. completeness assertion)
In stable environments and predictable environments
When gathered from reliable sources
◉ Consideration of Fraud in Audits
Answer: Fraud happens when there is pressure, opportunity, and
rationalization.
Fraud is intentional.
Auditors should apply analytical procedures to Revenue accounts.
Compare recorded sales to production capacity.
◉ Fraud Risk
Answer: Increased by the opportunity for management override.
Increased by improper revenue recognition.
◉ Responses to Fraud Risk
Answer: Assign more experienced personnel. Make unpredictable
audit procedure choices.
, ◉ Auditor responsibility for consideration of laws and regulations
Answer: Should consider law and regulations recognized as having a
direct effect on the determination of material amounts and
disclosures.
Other indirect effects of laws may be material in the future due to
penalties or the business continuing as a going concern.
◉ SU 4
Answer: Strategic Planning Issues
◉ Internal Auditors
Answer: Their goal is to evaluate and improve an entity's
effectiveness and processes. This can help external auditor
understand internal and the entity and its environment.
Can use for audit evidence or as assistance. External auditors still
have all responsibility for opinion on engagement.
◉ Systematic and Disciplined Approach for Internal Auditors
Answer: Required for internal auditors. Plan, supervise, review,
document, etc.
◉ Using Internal Audit as Direct Assistance
AND SUBSTANTIVE PROCEDURES
PRACTICE EXAM ITEMS ANSWERS
FIELDWORK AND DOCUMENTATION
REVIEW 2026
◉ Materiality
Answer: Professional judgment about whether or not a
misstatement could reasonable influence the economic decision of
users as a group.
◉ Planning Materiality
Answer: Defined at three levels for planning purposes. Financial
Statement level, account balances, and classes of transactions.
◉ Performance Materiality
Answer: Set by auditor at less than the materiality for the
statements as a whole. It is an adjustment to reduce to an
appropriately low level the probability that the sum of uncorrected
and undetected misstatements exceeds the applicable materiality.
◉ Misstatements
,Answer: The auditor should consider uncorrected misstatements
and accumulate identified misstatements.
◉ Types of Misstatements
Answer: Factual (Real, no doubt)
Judgmental Misstatements (unreasonable accounting estimate or
inappropriate accounting policy)
Projected (auditor estimate of the misstatements in the populations
based on audit samples)
◉ Analytical Procedures
Answer: Studies plausible relationships among financial and
nonfinancial data. Develop an expectation and compare to
management balance. Can be used as risk assessment (planning) or
as a substantive procedure to eliminate the need for substantive
tests of details in a low risk account.
◉ Five Sources of Information for Analytical Procedures
Answer: 1. Financial Information from Comparable Prior Periods
2. Anticipated Results
3. Relationships among Elements of Financial Information (ex. Sales
and A/R should increase/decrease by similar amounts)
4. Comparable information from client's industry
,5. Relationships between financial and relevant nonfinancial
information (Ex. # of hours worked and labor cost)
◉ When are analytical procedures alone enough?
Answer: When tests of details may not indicate a potential
misstatement (ex. completeness assertion)
In stable environments and predictable environments
When gathered from reliable sources
◉ Consideration of Fraud in Audits
Answer: Fraud happens when there is pressure, opportunity, and
rationalization.
Fraud is intentional.
Auditors should apply analytical procedures to Revenue accounts.
Compare recorded sales to production capacity.
◉ Fraud Risk
Answer: Increased by the opportunity for management override.
Increased by improper revenue recognition.
◉ Responses to Fraud Risk
Answer: Assign more experienced personnel. Make unpredictable
audit procedure choices.
, ◉ Auditor responsibility for consideration of laws and regulations
Answer: Should consider law and regulations recognized as having a
direct effect on the determination of material amounts and
disclosures.
Other indirect effects of laws may be material in the future due to
penalties or the business continuing as a going concern.
◉ SU 4
Answer: Strategic Planning Issues
◉ Internal Auditors
Answer: Their goal is to evaluate and improve an entity's
effectiveness and processes. This can help external auditor
understand internal and the entity and its environment.
Can use for audit evidence or as assistance. External auditors still
have all responsibility for opinion on engagement.
◉ Systematic and Disciplined Approach for Internal Auditors
Answer: Required for internal auditors. Plan, supervise, review,
document, etc.
◉ Using Internal Audit as Direct Assistance
