To Obtain an Understanding of an Entity's Control Environment, an Auditor

question 69

Multiple Choice

To obtain an understanding of an entity's control environment, an auditor should concentrate on the substance of management's policies and procedures rather than their form because

• A) management may establish appropriate policies and procedures but not act on them.
• B) the board of directors may not be aware of management's attitude toward the control environment.
• C) the auditor may believe that the policies and procedures are inappropriate for that particular entity.
• D) the policies and procedures may be so weak that no reliance is contemplated by the auditor.

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Definitions:

Fee Simple

A type of freehold ownership where the owner has the greatest possible rights over the land forever.

Prescriptive Right

A right acquired through long-term use, such as the right to cross someone else's land, established by consistent and uninterrupted use over a period prescribed by law.

Covenant

A formal, binding agreement or promise, often found in contracts and legal documents.

Crown Patent

An official document transferring land from the Crown (government) to an individual, entity, or corporation, granting them ownership.