Auditors Typically Rely on Internal Controls of Their Private Company

question 3

Multiple Choice

Auditors typically rely on internal controls of their private company clients

• A) only as needed to complete the audit and satisfy Sarbanes-Oxley requirements.
• B) only if the controls are determined to be effective.
• C) only if the client asks an auditor to test controls.
• D) only if the controls are sufficient to increase control risk to an acceptable level.

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Definitions:

No Par Common Stock

is common stock that has been issued without a par value, meaning its value is not fixed in the company’s charter but is determined by the market.

Cash Price

The amount of money that a buyer must pay to purchase a good or service immediately without financing.

Paid-In Capital

Funds that a company raises by issuing shares of stock, representing the amount shareholders contribute in exchange for stock.

Treasury Stock

Shares that were issued and later reacquired by the issuing corporation, not considered when calculating dividends or earnings per share.