In Making Judgments About the Effect of the Internal Auditors

question 93

Multiple Choice

In making judgments about the effect of the internal auditors' work on the external auditor's procedures in specific audit areas, which of the following is not one of the issues related to the specific audit areas that is considered by the external auditor?

• A) Materiality of the financial statement amounts.
• B) Risk of material misstatement of the assertions related to these financial statement amounts.
• C) Degree of subjectivity involved in the evaluation of the audit evidence gathered in support of the assertions.
• D) All of the above are considered by the auditor.

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Definitions:

Capital Deficit Balances

Situations where a company's total capital is less than zero, indicating that its liabilities exceed its assets.

Recorded Capital Account

An account on a company's balance sheet that represents the shareholders' equity invested in the business, either by contributing capital or retaining earnings.

Distribution

The process of allocating assets, such as cash dividends or stock shares, to shareholders as part of the earnings generated by a company.

Final Settlement

The completion of a financial transaction where the seller delivers the agreed goods or assets and the buyer pays for them as per the terms of the contract.