Question

Some substantive procedures can only be performed at year-end _______.

1) due to management not allowing the auditors access beforehand
2) because there have been no transactions occurring in these accounts during the year
3) due to the nature of the assertion or the timing of the transactions
4) once the internal audit function has completed its preliminary testing of the account

Answer 1

Some substantive procedures in auditing must be performed at year-end due to the nature of the assertion or the timing of the transactions, as they pertain to year-end financial events and provide evidence for fiscal period data. Therefore, the correct option is 3.

Step-by-step explanation:

The student's question pertains to the timing of substantive procedures in auditing. Substantive procedures are a part of the audit process that includes tests to obtain direct evidence about the completeness, accuracy, and validity of assertions made by management in their financial statements. The correct answer to why some substantive procedures can only be performed at year-end is due to the nature of the assertion or the timing of the transactions. This answer relates to the fact that certain transactions or events are related to, or take place at, year end, which affects how auditors gather sufficient appropriate audit evidence.

For example, counting physical inventory is typically done at year-end because it reflects the inventory position at a point in time, which is directly tied to the year-end financial statements. Also, auditors often test year-end accruals or valuation assertions when they can observe the complete set of data for the fiscal period.