Tests of Controls and Substantive Tests of Transactions Are an Important

question 119

Multiple Choice

Tests of controls and substantive tests of transactions are an important determinant of the extent of the auditor's use of tests of details of balances. Which of the following is true?

• A) They are likely to be performed prior to the client's end of the fiscal year.
• B) They are likely to eliminate the need for tests of details of balances.
• C) They are likely to have no impact on the planned tests of details of balances.
• D) They are likely to be used only in the audit of internal control.

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Definitions:

Equilibrium Price

The price at which the quantity of a good or service demanded by consumers equals the quantity supplied by producers.

Consumer Surplus

The difference between what consumers are willing to pay for a good or service and what they actually pay, representing a measure of consumer benefit.

Producer Surplus

The difference between what producers are willing to accept for a good versus what they actually receive, typically viewed as a measure of producer welfare.

Consumer Surplus

The divergence between the sum consumers are prepared to pay for a product or service and the sum that is actually paid.