When the Auditor Is Gathering Evidence, If the Source of the Evidence

question 16

Multiple Choice

When the auditor is gathering evidence, if the source of the evidence is independent of the client, the auditor will conclude that the evidence is:

• A) reliable.
• B) not reliable unless the provider is qualified to provide the evidence.
• C) not reliable.
• D) reliable if the provider has no reason to be biased.

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Definitions:

Dividends

Disbursements from a corporation to individuals holding its stock, serving as their share of the earnings.

Ending Equity

The value of an owner's interest in a property or a business at the end of an accounting period after all debts have been subtracted.

Retained Earnings

A portion of company profits not paid out as dividends but reinvested in the business, used for debt payment, or saved as cash reserves.

Profits

The financial gain obtained when the revenue generated from business activities exceeds the expenses, costs, and taxes needed to maintain the operation.