A Financial Statement Auditor Concludes That Internal Controls Over Cash

question 8

Multiple Choice

A financial statement auditor concludes that internal controls over cash are not functioning as designed.She believes that material misstatements to the cash accounts are possible because of the deficiencies.What course of action is the auditor most likely to take?

• A)Report the audit to the regulatory agencies of the IRS and SEC.
• B)Develop specific tests for cash balances to determine the extent of misstatement.
• C)Explain to the client that the audit firm will not be able to complete the audit.
• D)Test the internal control over cash.

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Definitions:

Tax Credit

A direct reduction in tax liability, not merely a reduction in taxable income, that decreases the total tax bill directly.

Interest Rate

The cost of borrowing money or the return on saving, expressed as a percentage of the amount borrowed or saved.

Exchange Rate

The value of one currency for the purpose of conversion to another, indicating how much of one currency can be exchanged for another.

Demand For Loanable Funds

The desire for borrowing money, driven by individuals, businesses, and governments, influenced by interest rates and economic conditions.