Financial Statement Users Cannot Be Expected to Evaluate Audit Performance

question 19

Multiple Choice

Financial statement users cannot be expected to evaluate audit performance because they will not have the time or the competence to do so. In such a situation, how is public confidence in the quality of professional services enhanced? When there are

• A) only business majors hired to work as auditing students with public accounting firms.
• B) adequate controls at the public accounting firm to limit the amount of overtime worked.
• C) high standards of performance and conduct on the part of all practitioners.
• D) strict rules about the type of work that employees should complete on a daily basis.

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Definitions:

Prepaid Insurance

An asset account that represents insurance payments made in advance, which are to be expensed over the period the insurance coverage pertains to.

Unearned Rent

Income received from property rentals before the rental period has occurred, considered a liability until the period covers it.

Adjusted Trial Balance

A list of all accounts and their balances after adjustments are made for accruals, deferrals, and errors to prepare for financial statement generation.

Net Income

The total profit of a company after all expenses, including taxes and operating costs, have been deducted from total revenue.