It Is Important for the Auditor to Consider the Competence

question 51

Multiple Choice

It is important for the auditor to consider the competence of the audit client's employees because their competence bears directly and importantly upon the:

• A) cost/benefit relationship of the system of internal control.
• B) timing of the tests to be performed.
• C) achievement of the objectives of the system of internal control.
• D) comparison of recorded accountability with assets.

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Definitions:

Unlimited Liability

A legal structure in which owners are personally and fully responsible for all debts and liabilities incurred by the business.

Personal Assets

Assets owned by an individual as opposed to those owned by businesses or governments, including tangible and intangible items.

Original Capital Investment

The initial sum of money used to start a business or investment, often used for assets, inventory, and other startup costs.

Net Income

The total profit or loss of a company after all revenues and expenses have been accounted for, often referred to as the bottom line.