Under Which of the Following Circumstances Would It Be Advisable

question 100

Multiple Choice

Under which of the following circumstances would it be advisable for the auditor to confirm accounts payable with creditors?

• A) The internal accounting control over accounts payable is effective, and there is sufficient evidence on hand to minimize the risk of a material misstatement.
• B) The confirmation response is expected to be favorable, and accounts payable balances are of immaterial amounts.
• C) The creditor statements are not available and internal control over payables is deficient.
• D) The majority of accounts payable balances are with associated companies.

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Definitions:

Ordinary Annuity

Uniform financial contributions dispensed at the end of sequential stages for a prescribed period.

Compounded Annually

Refers to the process of applying interest to both the initial principal and the accumulated interest over the past year.

RRSP

A Registered Retirement Savings Plan, a government-approved program in Canada that allows individuals to save for retirement on a tax-deferred basis.

Purchasing Power

The purchasing power of a currency represented through the quantity of goods or services a single unit can acquire.