7. To obtain an understanding of an entity's control environment, an auditor should concentrate on the substance of management's policies and procedures rather than their form because: A) management may establish appropriate policies and procedures but not act on them. B) the board of directors may not be aware of management's attitude toward the control environment. C) the auditor may believe that the policies and procedures are inappropriate for that particular entity D) the policies and procedures may be so weak that no reliance is contemplated by the auditor. 8. Shown below (1 through 5) are the five types of tests which auditors use to determine whether financial statements are fairly stated. Which three are substantive tests? 1. risk assessment procedures 2. tests of controls 3. tests of transactions 4. analytical procedures 5. tests of details of balances A) 1, 2, and 3. B) 3, 4, and 5. C) 2,3, and 5. D) 2, 3, and 4. 9. If no material differences are found using analytical procedures and the auditor concludes that misstatements are not likely to have occurred: A) other substantive tests may be reduced, B) it will be necessary to increase the tests of balances. C) it will not be necessary to perform tests of balances. D) it will be necessary to increase the tests of transactions. 10. The auditor would design which of the following audit tests to detect possible monetary errors in the financial statements? A) Control tests B) Analytical procedures C) Risk assessment procedures D) Tests of operating effectives of controls over revenue and cash