In Addition to Evaluating the Frequency of Deviations in Tests

question 63

Multiple Choice

In addition to evaluating the frequency of deviations in tests of controls, an auditor should also consider certain qualitative aspects of the deviations. The auditor most likely would give broader consideration to the implications of a deviation if it was:

• A)the only deviation discovered in the sample.
• B)identical to a deviation discovered during the prior year's audit.
• C)caused by an employee's oversight.
• D)initially concealed by a forged document.

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Definitions:

Premium Amortized

The process of gradually writing off the initial cost of a premium over the period of the bond to match it with the interest earned.

Interest Cost

The cost incurred by an entity for borrowing funds, essentially the price paid for the use of borrowed money.

Bonds Issued

Debt securities sold by corporations or governments to investors to raise capital, requiring periodic interest payments and repayment of principal at maturity.

Bonds at Discount

Bonds issued below their face value, where the difference between the issue price and the face value represents the interest.