Under Which of the Following Circumstances Would It Be Advisable

question 114

Multiple Choice

Under which of the following circumstances would it be advisable for the auditor to confirm accounts payable with creditors?

• A)Internal accounting control over accounts payable is adequate, and there is sufficient evidence on hand to minimize the risk of a material misstatement.
• B)Confirmation response is expected to be favorable, and accounts payable balances are of immaterial amounts.
• C)Creditor statements are not available and internal control over payables is unsatisfactory.
• D)The majority of accounts payable balances are with associated companies.

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Definitions:

Excessive Taxation

Taxing beyond what is fair or reasonable, often perceived as placing undue burden on taxpayers.

S Corporation

A specialized form of corporation in the United States that allows income to be passed through to shareholders for federal tax purposes, avoiding double taxation.

Profit Distributions

The sharing of earnings among the shareholders of a company, often in the form of dividends.

Involuntary Dissolution

The compulsory termination of a corporation or partnership by a court order, often due to failure to comply with legal requirements or insolvency.