An Internal Audit Activity Is Participating in the Due Diligence

question 271

Multiple Choice

An internal audit activity is participating in the due diligence work for an acquisition that a company is considering. One engagement objective is to determine if the acquisition's accounts payable contain all outstanding liabilities. Which of the following audit procedures would not be relevant for this objective?

• A) Examine supporting documentation of subsequent (after-period) cash disbursements and verify period of liability.
• B) Send confirmations, including zero-balance accounts, to vendors with whom the company normally does business.
• C) Select a sample of accounts payable from the accounts payable list and verify the supporting receiving reports, purchase orders, and invoices.
• D) Trace receiving reports issued before the period end to the related vendor invoices and accounts payable list.

Comprehend how the capital allocation line (CAL) and the efficient frontier guide investment decisions.

Calculate portfolio expected returns and standard deviations based on component weights and characteristics.

Understand the concept and calculation of the certainty equivalent rate for comparing investments.

Understand the key changes and controversies surrounding the transition from AASB 114 to AASB 8/IFRS 8.

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Definitions:

Net Income

The amount of profit left after deducting all costs, taxes, and expenses from total revenue.

Accumulated Depreciation

The total amount of a tangible asset's cost that has been allocated as depreciation expense over its useful life.

Cash Dividends

Payments made by a corporation to its shareholder members, typically in the form of cash, as a distribution of profits.

Accounts Receivable

Money owed to a company by its customers from sales or services rendered on credit.