In Practice, Early Substantive Testing of Account Balances Is Done

question 12

Multiple Choice

In practice, early substantive testing of account balances is done only when:

• A) the client has a calendar year end.
• B) the client has reporting requirements under the Securities Acts.
• C) evidence indicates effective control policies and procedures.
• D) the primarily substantive approach is taken.
• E) internal controls are weak.

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Definitions:

Fiat Money

Currency without intrinsic value that is established as legal tender by government regulation.

Subprime Mortgage Market

The market for loans to borrowers with lower credit ratings, implying higher risk for lenders and typically resulting in higher interest rates.

Recession of 2001

A brief economic downturn in the United States that began in March 2001 and ended in November 2001, marked by the bursting of the dot-com bubble.

Subprime Mortgage Market

A segment of the mortgage market that caters to individuals with poor credit histories who are considered higher risk borrowers.