Question

Audit procedures for a component that is significant in nature due to its individual financial significance to the group may include:

a) Only analytical procedures
b) In-depth substantive testing
c) Ignoring financial statements
d) Reliance on management representation letters

Answer 1

Audit procedures for a significant component may include in-depth substantive testing, reliance on management representation letters, and analytical procedures.

Step-by-step explanation:

Audit procedures for a component that is significant in nature due to its individual financial significance to the group may include:

1. In-depth substantive testing: This involves detailed examination of the account balances, transactions, and supporting documents to gather sufficient evidence.
2. Reliance on management representation letters: These are written statements from management that provide information and confirmations regarding the financial statements.
3. Analytical procedures: These involve comparing financial information and ratios to industry averages and prior periods to identify potential issues.