Most Audits of a Company Are Done Annually by the Same

question 80

Multiple Choice

Most audits of a company are done annually by the same audit firm. Except for initial engagements, the auditor begins the audit with a great deal of information about the client's internal controls developed in prior years. Because systems and controls usually don't change frequently:

• A) it eases the burden on the auditor's requirement to do a complete study of the controls this year.
• B) it is sufficient for the auditor just to inquire of the client whether the controls have been changed since last year.
• C) the auditor can skip the evaluation of this area on repeat engagements.
• D) this information can be updated and carried forward to the current year's audit.

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Definitions:

Holders of Record

Registered owners of a security at a specific point in time, often used to determine who is entitled to dividends or rights distributions.

Dividend Payable

The amount declared by a company’s board of directors to be distributed among shareholders at a set date in the future.

Residual Dividend Policy

A strategy where dividends are based on the earnings left over after all project capital needs are met.

Debt-Equity Ratio

The ratio that measures the relative proportion of shareholders' equity and debt used to finance a company's assets.