Auditors Typically Rely on Internal Controls of Their Private Company

question 3

Multiple Choice

Auditors typically rely on internal controls of their private company clients

• A) only as needed to complete the audit and satisfy Sarbanes-Oxley requirements.
• B) only if the controls are determined to be effective.
• C) only if the client asks an auditor to test controls.
• D) only if the controls are sufficient to increase control risk to an acceptable level.

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Definitions:

Cash Flows

The aggregate of all monetary exchanges into and out of a business endeavor, directly affecting its operational cash levels.

Discount Rate

The interest rate used in discounted cash flow forecasts to decipher the present value of prospective cash flows.

Present Value

Today’s fiscal equivalent of money anticipated in the future or sequences of cash inflows, discounted using a specified rate of return.

Today's Dollars

Refers to the value of money in terms of the purchasing power of the current year, accounting for inflation.