As Part of Gaining an Initial Understanding of Internal Control

question 25

Multiple Choice

As part of gaining an initial understanding of internal control, an auditor is required to do all of the following except:

• A)consider factors that affect the risk of material misstatement.
• B)ascertain whether internal control policies and procedures have been placed in operation.
• C)identify the types of potential misstatements that can occur.
• D)obtain knowledge about the operating effectiveness of the internal control.

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Definitions:

Adjusting Entry

A journal entry made in accounting records at the end of an accounting period to allocate income and expenditures to the appropriate period.

Taxes Payable

The amount of tax a company or individual owes to the tax authorities but has not yet paid by the end of the accounting period.

Taxes Expense

The total amount of taxes owed by an individual or corporation to the government within a fiscal period.

Adjusted Entry

An accounting record made to amend the effects of previously recorded transactions to accurately reflect financial realities.