Recalculating interest expense using the terms in a loan agreement is primarily which type of audit procedure?
Correct answer: B. A substantive procedure
- A. A test of controls
- B. A substantive procedure
- C. An engagement acceptance procedure
- D. A subsequent events procedure
Explanation
The recalculation directly tests whether a recorded financial amount is accurate, making it a substantive procedure. A test of controls would assess whether a control operates effectively rather than directly verifying the expense amount.
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About Auditing
Auditing examines accounting records and financial statements to determine whether they present a reliable and fairly stated position. The subject covers audit objectives, internal controls, audit evidence, materiality, vouching, verification, working papers, auditor independence, audit reports, and the distinction between an audit and accounting or investigation.
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