AU-C 315, Understanding the Entity and Its Environment, and Assessing

question 102

Multiple Choice

AU-C 315, Understanding the Entity and Its Environment, and Assessing the Risks of Material Misstatement, defines risk assessment procedures as _______.

• A)audit procedures performed to obtain an understanding of the auditor and its environment, including the entity's internal control, to identify and assess the risk of material misstatement at the financial statement level and relevant assertion levels, whether due to error or fraud
• B)audit procedures performed to obtain an understanding of the entity and its environment, including the entity's internal control, to identify and assess the risk of material misstatement, at the financial statement level and relevant assertion levels - whether due to error or fraud
• C)any procedure that involves international currency transactions
• D)any procedure that was performed by the prior auditor, which is repeated by the current auditor

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Definitions:

Reserve Requirements

Regulations set by central banks determining the minimum amount of reserves that must be held by a commercial bank.

Checkable Deposit Liabilities

These are bank account deposits that are immediately available to make payments and transfers, typically seen in checking accounts.

Excess Reserves

Funds that banks hold over and above the required minimum reserves set by the central bank, available for lending or investment.

United States Bonds

United States Bonds are debt securities issued by the U.S. Department of the Treasury to finance government spending as an alternative to taxation.