An Auditor Wishes to Perform Tests of Controls on a Client's

question 25

Multiple Choice

An auditor wishes to perform tests of controls on a client's cash disbursements procedures. If the control activities leave no audit trail of documentary evidence, the auditor most likely will test the activities by:

• A)confirmation and observation.
• B)observation and inquiry.
• C)analytical procedures and confirmation.
• D)inquiry and analytical procedures.

---

Definitions:

High P/E

A stock with a high price-to-earnings ratio, often indicating expectations of future growth or overvaluation.

Dividend Yields

An economic indicator demonstrating the yearly dividend distribution of a firm in comparison to its share price.

Submartingale

A stochastic process in which the conditional expected value of a future observation, given the past, is at least as great as the present observation, often applied in financial modeling.

Nonrandom Walk

A theory suggesting that stock market prices do not follow a random path but are influenced by past movements and can thus be predicted to some extent.