In Order to Properly Plan and Perform an Audit, an Important

question 29

Multiple Choice

In order to properly plan and perform an audit, an important fact for both the auditor and the client to understand is that

• A) the internal control policies and procedures are developed by the auditors.
• B) the purpose of an audit is to prevent fraud.
• C) management is responsible for the preparation of the financial statements.
• D) management can restrict the auditor's access to important information relevant to the financial statements.

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Definitions:

Modified AGI

An adjusted gross income figure used for specific tax calculations, modified by adding back certain deductions and exclusions.

Self-employment Tax

The tax self-employed individuals must pay to cover their Social Security and Medicare obligations.

Gross Earnings

The total amount of money an individual earns before any deductions or taxes are applied.

Employment Test

A criterion or series of criteria used to determine the status of individuals as employees or independent contractors for tax and legal purposes.