Which of the Following Is True Regarding the Relationship Between

question 22

Multiple Choice

Which of the following is true regarding the relationship between tests of controls and procedures to obtain an understanding?

• A) In obtaining an understanding of internal control, the procedures to obtain an understanding are applied to all controls identified during that phase.
• B) Tests of controls are applied only when the assessed control risk has not been satisfied by the procedures to obtain an understanding.
• C) Procedures to obtain an understanding are performed only on one or a few transactions.
• D) All of the above are correct.

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Definitions:

Line of Credit

A flexible loan from a bank or financial institution that offers a borrower a maximum amount of money they can borrow over a specified time period.

Receivable Financing

A financing arrangement where a business uses its accounts receivable as collateral for a loan, improving cash flow.

Commercial Banks

are financial institutions that offer a wide range of services such as accepting deposits, providing business and personal loans, and other financial products and services to the public.

Financial Track Records

Documentation or history that shows the financial performance and health of a company or individual over time.