In an Environment That Is Highly Automated, an Auditor Determines

question 258

Multiple Choice

In an environment that is highly automated, an auditor determines that it is not possible to reduce detection risk solely by substantive tests of transactions. Under these circumstances, the auditor most likely would:

• A) Perform tests of controls to support a lower level of assessed control risk.
• B) Increase the sample size to reduce sampling risk and detection risk.
• C) Adjust the materiality level and consider the effect on inherent risk.
• D) Apply analytical procedures and consider the effect on control risk.

Comprehend the sequence of steps in the communication process, particularly within business contexts.

Define key terms in business communication, including mental filters and bypassing, and comprehend their impacts.

Describe the main categories and networks of communication within an organization.

Understand the concept and phases of change within groups.

---

Definitions:

Separate Income Tax Returns

Tax documents filed by individuals or entities separately, as opposed to joint or consolidated filings.

Separate Return Method

A tax filing strategy used by businesses operating in multiple states or countries, where each entity files its own tax return rather than a consolidated return for the entire group.

Income Tax Expense

The total amount of income tax owed to federal, state, and local tax authorities for the period.

Net Operating Loss Carryforward

A tax provision that allows a company to apply a fiscal year's net operating losses to future years' profits in order to reduce taxable income.