If a Company Has an Effective Internal Audit Department

question 35

Multiple Choice

If a company has an effective internal audit department,

• A) the internal auditors can express an opinion on the fairness of the financial statements.
• B) their work cannot be used by the external auditors per PCAOB Standard 5.
• C) it can reduce external audit costs by providing direct assistance to the external auditors.
• D) the internal auditors must be CPAs in order for the external auditors to rely on their work.

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Definitions:

Accrued Fees Earned

Revenues that have been earned by providing a service or product, but have not yet been received or invoiced to the client.

Reversing Entry

An accounting entry that is made at the beginning of an accounting period to reverse or cancel out adjusting entries made at the end of the previous accounting period.

Notes Receivable

Written promises for amounts to be received, typically including interest, recorded by the recipient.

Noncurrent Assets

Assets expected to provide economic benefits beyond the next year or operating cycle, excluding items for resale.