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:

Average Sale Period

The average time period that items remain in inventory before being sold, indicating the liquidity of inventory.

Common Stock

A type of equity security that represents ownership in a corporation, entitling the holder to vote at shareholder meetings and receive dividends.

Total Asset Turnover

A financial ratio that measures a company's ability to generate sales from its assets, calculated as sales divided by total assets.

Common Stock

A type of equity ownership in a corporation, representing a claim on a portion of the profits and assets.