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:

Par

The face value of a bond or security, often used in the context of bonds trading at, above, or below their issued price.

Market Rate

The prevailing interest rate available in the marketplace for similar financial instruments or loans.

Financial Instrument

A contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.

Maturity Value

The amount that will be payable to the holder of a financial instrument at its maturity date, including principal and interest.