The Purpose of Phase 3 in the "Process for Understanding

question 12

Multiple Choice

The purpose of phase 3 in the "process for understanding internal control and assessing control risk" is to:

• A)design, perform and evaluate tests of controls.
• B)obtain and document an understanding of internal control design an operation.
• C)assess control risk.
• D)decide planned detection risk and substantive tests.

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Definitions:

Strip Bond

A debt security that pays no interest and is sold at a discount from its face value, with the investor receiving the bond's face value at maturity.

Compounded Semiannually

The process of applying interest to an investment or loan twice a year, resulting in compound growth.

Face Value

The nominal value or dollar value stated on a security or financial instrument, such as a bond.

Investment Yield

The income returned on an investment, such as the interest or dividends received, expressed as a percentage of the investment's cost.