Which of the Following Represents a Correct Statement Regarding Internal

question 78

Multiple Choice

Which of the following represents a correct statement regarding internal control testing?

• A) When auditors plan to use evidence about the operating effectiveness of internal control contained in prior audits, auditing standards require tests of the controls' effectiveness at least every other year.
• B) The greater the risk, the less audit evidence the auditor should obtain that controls are operating effectively.
• C) The auditor uses control risk assessment and results of tests of controls to determine planned detection risk and the related substantive tests for the financial statement audit.
• D) Testing of internal controls can only be performed by the auditor at the end of the fiscal year.

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Definitions:

Cost Index

An index that measures the change in cost of a specific basket of goods and services over time.

Ending Inventory

The aggregate value of goods up for sale at the termination of an accounting interval.

Financial Reporting

The process of producing statements that disclose an organization's financial status to management, investors, and the government.

Inventory Cost Flow Assumption

A method used in accounting to determine the cost of goods sold and ending inventory value, examples include FIFO, LIFO, and average cost methods.