The Primary Purpose of Obtaining an Understanding of the Company's

question 1

Multiple Choice

The primary purpose of obtaining an understanding of the company's internal controls in the financial statement audit is:

• A)To help the auditors develop the audit program
• B)Make suggestions to management to improve internal controls.
• C)Obtain direct sufficient appropriate audit evidence to afford a reasonable basis for an opinion on the financial statements.
• D)To determine whether the company has changed any accounting principles.

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Definitions:

Labor Supplied

The total hours of work that workers are willing to offer at a given wage rate.

Hourly Wage Rate

The amount of money paid for each hour of work.

Opportunity Cost

The cost of the next best alternative forgone as a result of making a decision.

Substitution Effect

The change in consumption patterns due to a change in the relative prices of goods.