How Can an Auditor Use Inquiry to Gain a Better

question 70

Multiple Choice

How can an auditor use inquiry to gain a better understanding of internal controls?

• A)By interviewing key employees to gain further insight into the internal control environment.
• B)By observing the safeguarding of assets by checking locked doors and safes.
• C)By tracing a transaction from the boundary of the organization through to the final reporting.
• D)By documenting thoroughly the internal control through the use of narratives.

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Definitions:

Compounded Quarterly

An investment or loan interest calculation method where interest is added to the principal four times a year.

Effective Annual Rate

The interest rate on an investment or loan that is annualized, taking compounding into account.

Compounded Quarterly

Refers to the calculation of interest on a principal amount, where the interest is added back to the principal sum after each quarter, leading to interest being calculated on a new, higher total.

Average Rate

Typically refers to the mean value of a series of rates (such as interest or exchange rates) over a specified period of time.