Which of the Following Is Not a Reason That the Auditor

question 20

Multiple Choice

Which of the following is not a reason that the auditor must gain an understanding of the client's internal control system?

• A)Better understand the client,its risks,and how it manages those risks.
• B)Assess control risk and identify the types of financial statement misstatements that are most likely to occur.
• C)Plan direct tests of account balances to determine if misstatements have occurred.
• D)All are reasons why auditors must gain an understanding of the client's internal control system.

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Definitions:

Common Stock

A type of security that represents ownership in a corporation and gives holders voting rights and a share in the company's profits through dividends.

Outstanding Stock

The shares of a corporation that have been issued and are in the hands of the public.

Long-Term Investments-HTM

Investments classified as held-to-maturity (HTM) are financial assets a company intends and is able to hold until a fixed future date.

Short-Term Investment-AFS

Refers to Available-for-Sale short-term investments that are not classified as held-to-maturity or trading, and can be sold in response to liquidity needs or changes in interest rates.