Auditors Perform Test of Controls and Substantive Tests of Transactions

question 61

Multiple Choice

Auditors perform test of controls and substantive tests of transactions for several reasons. Which of the following is not one of those reasons?

• A) for larger public company audits, to conclude the control is operating effectively
• B) to reduce assessed control risk and thereby reduce tests of details of balances
• C) to determine whether the exception rate in the population is sufficiently low
• D) to use rate of occurrence tests in the tests of details of balances

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Definitions:

Deferred Tax Liabilities

Future tax payments due to temporary differences between financial accounting and tax accounting practices.

Deferred Tax Assets

Assets on a company's balance sheet that may be used to reduce future tax liability resulting from temporary timing differences between accounting and tax treatments.

Current Tax Liabilities

Taxes owed to the government within the current fiscal year.