Which of the Following Statements Is True About an Auditor's

question 14

Multiple Choice

Which of the following statements is true about an auditor's responsibility to communicate with respect to a public company's internal controls?

• A) The auditor will issue an adverse report on the effectiveness of internal controls if a material weakness in internal controls over financial reporting exists.
• B) Auditors are required to communicate all significant deficiencies in internal control to management but not necessarily to the audit committee.
• C) Auditors are required to communicate all significant deficiencies in internal control to the audit committee but not necessarily to management.
• D) The difference between a material weakness and a significant deficiency is inconsequential.
• E) The auditor's judgment is based on either the likelihood of the misstatement or on the potential magnitude of the misstatement.

Interpret the effects of depreciation on operating expenses and net income.

Comprehend the methodology behind computing return on total assets.

Understand the concepts of net operating income, sales, stockholders' equity, and average operating assets.

Calculate the return on investment (ROI), residual income, and margin given financial data.