An Auditor Is Evaluating a Client's Internal Controls

question 6

Multiple Choice

An auditor is evaluating a client's internal controls. Which of the following situations would be the most difficult internal control issue for an auditor to detect?

• A)The accounting staff neglects the control, due to increased transactions to be processed.
• B)The technology department writes a program that does not properly implement the control, due to a lack of understanding.
• C)Two employees, who work in different departments, are circumventing an internal control.
• D)Someone erroneously disables edit checks in a software program designed to identify control exceptions.

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Definitions:

Substitutes

Goods or services that can be used in place of each other, where an increase in the price of one leads to an increase in demand for the other.

Relatively Inelastic

Describes a situation where the demand or supply for a good or service changes only slightly in response to changes in price.

Price Elastic

Refers to a situation where the demand or supply for a product or service significantly changes in response to its price change.

Soft Drinks

Non-alcoholic beverages that are usually carbonated and contain various flavorings and sweeteners.