A Primary Objective of Procedures Performed to Obtain an Understanding

question 58

Multiple Choice

A primary objective of procedures performed to obtain an understanding of internal control is to provide an auditor with ________.

• A)Knowledge necessary to assess the risks of material misstatements.
• B)Evidence to use to assess inherent risk.
• C)A basis for modifying tests of controls.
• D)An evaluation of the consistency of application of management's policies.

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Definitions:

Equity Investment

An investment in stock or shares representing ownership interest in a company.

Equity Method

An accounting technique used to record investments in other companies, recognizing income in proportion to the investor's share of the company's earnings.

Outstanding Stock

Shares that have been issued by a company and are held by investors, including both public shareholders and company insiders.

Net Income

The total profit of a company after all expenses, including taxes and costs, have been subtracted from total revenues.