Which of the Following Strategies Would a CPA Most Likely

question 369

Multiple Choice

Which of the following strategies would a CPA most likely consider in auditing an entity that processes most of its financial data only in electronic form, such as a paperless system?

• A) Continuous monitoring and analysis of transaction processing with an embedded audit module.
• B) Increased reliance on internal control activities that emphasize the segregation of duties.
• C) Verification of encrypted digital certificates used to monitor the authorization of transactions.
• D) Extensive testing of firewall boundaries that restrict the recording of outside network traffic.

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Definitions:

Debt-Equity Ratio

The ratio that measures the relative proportion of shareholders' equity and debt used to finance a company's assets.

After-Tax Earnings

The amount of net income a firm has after all taxes have been paid, representing the company's profitability.

Retained Earnings

Profits that a company keeps or retains rather than distributing to shareholders as dividends, often used for reinvestment.

Taxable Income

The amount of income subject to tax, after deductions and exemptions, as determined by tax laws.