Which of the Following Best Describes a CPA's Engagement to Report

question 1011

Multiple Choice

Which of the following best describes a CPA's engagement to report on a nonissuer's internal control over financial reporting?

• A) An attestation engagement to examine and report on management's written assertions about the effectiveness of its internal control.
• B) An audit engagement to render an opinion on the entity's internal control.
• C) A prospective engagement to project, for a period of time not to exceed one year, and report on the expected benefits of the entity's internal control.
• D) A consulting engagement to provide constructive advice to the entity on its internal control.

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Definitions:

Financial Leverage

The use of borrowed funds with a fixed cost in an attempt to increase the returns to shareholders by magnifying investment gains or losses.

EBIT

Earnings Before Interest and Taxes, a financial metric that calculates a firm’s profit excluding interest and income tax expenses.

Variable Cost

A cost that varies directly with the level of production or volume of output, as opposed to fixed costs, which remain constant regardless of activity level.

Direct Labor

The wages of employees who are directly involved in the production of goods or services.