Question

Which statement best describes the interaction of the systems and substantive approaches in the audit plan?

A) The systems approach focuses on testing controls to make sure they are effective, while the substantive approach is the detailed testing of specific accounts for accuracy.
B) The systems approach focuses on detailed testing of specific accounts for accuracy, while the substantive approach is the testing controls to make sure they are effective.
C) The systems approach focuses on the use of computer systems to aid in the audit while the substantive approach focuses on more manual tests.
D) A thoroughly designed systems approach to auditing can eliminate the need for any substantive procedures.

Answer 1

The systems approach in auditing focuses on evaluating the effectiveness of controls, whereas the substantive approach includes detailed testing of specific account balances and transactions for accuracy.

Step-by-step explanation:

The correct statement that best describes the interaction of the systems and substantive approaches in the audit plan is: A) The systems approach focuses on testing controls to make sure they are effective, while the substantive approach is the detailed testing of specific accounts for accuracy. The systems approach involves the auditor gaining an understanding of the client's internal control system to assess the risk of material misstatement and determine the nature, timing, and extent of audit procedures. In contrast, the substantive approach includes a range of procedures such as inspection, observation, confirmation, recalculation, and analytical procedures to verify account balances and the integrity of transactions.

The systems approach in auditing involves evaluating and testing the internal controls of an organization to determine their effectiveness in preventing and detecting fraud or errors. This includes assessing the design and implementation of controls, as well as testing their operating effectiveness.

On the other hand, the substantive approach involves detailed testing of specific accounts or transactions to verify their accuracy and completeness. This includes examining supporting documents, conducting analytical procedures, and performing substantive tests of details.