Which of the Following Is Not a Reason That the Auditor

question 20

Multiple Choice

Which of the following is not a reason that the auditor must gain an understanding of the client's internal control system?

• A)Better understand the client,its risks,and how it manages those risks.
• B)Assess control risk and identify the types of financial statement misstatements that are most likely to occur.
• C)Plan direct tests of account balances to determine if misstatements have occurred.
• D)All are reasons why auditors must gain an understanding of the client's internal control system.

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Definitions:

Additional Investment

Funds invested into a company or assets beyond the initial expenditure, often to support growth, cover operational costs, or finance new projects.

Ending Balances

The final amount in an account at the end of an accounting period, after all transactions have been accounted for, which becomes the beginning balance for the next period.

Capital Deficiency

A situation where a company's total capital is less than the par value of its capital stock.

Noncash Assets

Items of value owned by a business or individual that are not in the form of cash, such as real estate, equipment, and patents.