After Obtaining an Understanding of the Entity's Internal Control and Assessing

question 40

Multiple Choice

After obtaining an understanding of the entity's internal control and assessing control risk, an auditor of a non-public company decided not to perform additional tests of controls. The auditor most likely concluded that the:

• A)additional evidence to support a further reduction in control risk was not cost beneficial.
• B)assessed level of inherent risk exceeded the assessed level of control risk.
• C)internal control structure was properly designed and justifiably may be relied on.
• D)evidence obtainable through tests of controls would not support an increased level of control risk.

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Definitions:

Expected Dividend

The forecasted dividend payment announced by a company for the upcoming period.

Expected Dividend Yield

The anticipated yield that an investment in stock will return in the form of dividends, expressed as a percentage of the stock's current price.

Constant

In financial terms, a fixed value that does not change over the period under consideration, often used in calculating interest and annuities.

Expected Total Return

The sum of all earnings from an investment, including capital gains and dividends, anticipated over a specific period.