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.

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Definitions:

Sale or Return

A sales agreement allowing the buyer to return unsold goods to the seller without obligation within a specified period.

On Approval

"On approval" is a transaction condition allowing a buyer to take possession of goods before deciding to complete the purchase, subject to the goods’ return if not satisfied.

Personalized Sweatshirts

Custom-made sweatshirts tailored to include specific designs, names, or emblems as requested by the purchaser.

Disavow the Contract

The act of denying any responsibility or support for the contract, thereby seeking to void the agreement.