Once an Understanding of the Client's Internal Control Is Obtained

question 7

Multiple Choice

Once an understanding of the client's internal control is obtained that is sufficient for audit planning, then the auditor must first assess:

• A) the level of control risk supported by the understanding obtained.
• B) whether a lower level of control risk could be supported.
• C) whether the financial statements are auditable.
• D) the level of control risk.

---

Definitions:

Straight-Line Method

A depreciation method that allocates an equal amount of depreciation each year over the asset's useful life.

Working Capital

The gap between a firm's current assets and its current liabilities, reflecting its short-term financial stability.

Net Present Value

A financial metric that calculates the present value of future cash flows minus the initial investment, used in capital budgeting to assess the profitability of investments.

Investment Project

A project involving the allocation of funds to assets or activities with the expectation of generating income or profit in the future.