Before Accepting an Engagement, the Auditor Should Evaluate Whether Other

question 49

Multiple Choice

Before accepting an engagement, the auditor should evaluate whether other conditions exist that raise questions as to the prospective client's auditability. Which of the following factors would be the least likely to cause concern about an entity's auditability?

• A) Related party transactions.
• B) Lack of audit trail.
• C) Disregard of responsibility to maintain adequate internal controls.
• D) Important evidence available only in electronic form.
• E) Inability to review the details supporting beginning balances.

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Definitions:

Internally Generated

Refers to assets, revenues, or values created through the operations and activities of the company, not through external acquisition.

Research Costs

Expenses related to the investigation and exploration of materials, processes, or markets to generate new knowledge.

Development Costs

Expenditures associated with the research and development of a company's products or services, which might be capitalized or expensed depending on the nature of the project and accounting standards.

Intangible Assets

Assets that do not have physical substance but are identifiable and provide future economic benefits, such as patents, trademarks, and copyrights.