The Primary Objective of Procedures Performed to Obtain an Understanding

question 59

Multiple Choice

The primary objective of procedures performed to obtain an understanding of the entity's internal control is to provide an auditor with:

• A)knowledge necessary for audit planning.
• B)evidential matter to use in assessing inherent risk.
• C)a basis for modifying tests of controls.
• D)an evaluation of the consistency of application of management's policies.

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Definitions:

Well-Established Firms

Companies that have been in operation for a long time and have a firm position in the market.

Interest-Rate Cost-Of-Funds

The cost incurred by financial institutions to borrow funds, which influences the interest rates they charge for loans and mortgages.

Perfectly Elastic

A situation in market economics where the quantity demanded or supplied of a good changes infinitely in response to any change in price.

Market Interest Rates

The prevailing rates at which borrowers can obtain loans and lenders can offer loans in the financial market, depending on supply and demand dynamics.