In Obtaining an Understanding of an Entity's Internal Control in a Financial

question 44

Multiple Choice

In obtaining an understanding of an entity's internal control in a financial statement audit of a nonpublic company, an auditor is not obligated to:

• A)determine whether the control activities have been placed in operation.
• B)perform procedures to understand the design of the internal control policies.
• C)document the understanding of the entity's internal control components.
• D)search for significant deficiencies in the operation of the internal control.

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Definitions:

Step Acquisition

The process of acquiring control over an investee in stages or steps over time, ultimately leading to consolidation.

Noncontrolling Interest

A shareholder's equity in a corporation that is less than the threshold required for control usually presented in consolidated financial statements.

Fiscal Year

A 12-month period used for accounting purposes and preparing financial statements, differing from the calendar year for some organizations.

Consolidated Financial Statement

A comprehensive financial statement that presents the overall financial position of a parent company and its subsidiaries as one single entity.