To Obtain an Understanding of a Continuing Client's Business in Planning

question 181

Multiple Choice

To obtain an understanding of a continuing client's business in planning an audit, an auditor most likely would:

• A) Perform tests of details of transactions and balances.
• B) Review prior-year audit documentation and the permanent file for the client.
• C) Read specialized industry journals.
• D) Reevaluate the client's internal control environment.

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Definitions:

60-Day Note

Definition: A financial instrument, or promissory note, that requires the borrower to pay back the principal balance along with any interest in 60 days.

Maturity Value

The total amount payable to an investor at the end of a debt security's life, including both the principal and any accrued interest.

Interest Rate

The percentage charged by a lender to a borrower for the use of assets, typically expressed as an annual percentage of the principal.

Uncollectible Account

A receivable owed to a company that is considered unlikley to be paid and is written off as a loss.