To Obtain an Understanding of an Entity's Control Environment, an Auditor

question 69

Multiple Choice

To obtain an understanding of an entity's control environment, an auditor should concentrate on the substance of management's policies and procedures rather than their form because

• A) management may establish appropriate policies and procedures but not act on them.
• B) the board of directors may not be aware of management's attitude toward the control environment.
• C) the auditor may believe that the policies and procedures are inappropriate for that particular entity.
• D) the policies and procedures may be so weak that no reliance is contemplated by the auditor.

---

Definitions:

Performance Evaluation

The process of assessing and reviewing an employee's or organization's work performance and outcomes against predefined objectives.

Departmental Sales

This term involves the revenue generated by different departments within a larger retail store or company, tracked separately to gauge performance.

Responsibility Accounting

An accounting system that collects, summarizes, and reports financial information related to the responsibilities of individual managers or departments, encouraging accountability.