In Which of the Following Situations Will Auditors Typically Rely

question 32

Multiple Choice

In which of the following situations will auditors typically rely on internal controls over financial reporting?

• A)Only as needed to satisfy SOX.
• B)Only if the controls are determined to be designed and operating effectively.
• C)Only if the clients asks the auditor to test controls.
• D)Only if the controls are sufficient to increase control risk to an acceptable level.

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Definitions:

Pollution Permits

Allowances given to companies that permit them to emit a certain amount of pollutants; can be bought, sold, or traded.

External Benefit

Positive effects of a transaction or activity on third parties not directly involved in the transaction, which are not reflected in the market price.

Negative Externality

A negative externality is a cost imposed on a third party not involved in the production or consumption of a good or service, such as pollution.

Positive Externality

A beneficial effect experienced by a third party who did not choose to incur that benefit, often resulting from an individual's or firm's actions.