Why Does an Auditor Evaluate the Client's System of Internal

question 68

Multiple Choice

Why does an auditor evaluate the client's system of internal control?

• A) to ascertain whether irregularities are probable
• B) to ascertain whether any employees have incompatible functions
• C) to determine the extent of substantive tests which must be performed
• D) to determine the extent of tests of controls which must be performed

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Definitions:

Profit-maximizing

The process or strategy of adjusting production and prices to achieve the highest possible profit, taking into account costs and market demand.

Marginal Product

The additional output that results from using one more unit of a particular input, holding all other inputs constant.

Wage

The fixed regular payment, typically calculated on an hourly, daily, or piecework basis, made by an employer to an employee, especially to manual or unskilled workers.

Diminishing Returns

A principle stating that adding an additional factor of production results in smaller increases in output.