After Obtaining an Understanding of an Entity's Internal Control System

question 52

Multiple Choice

After obtaining an understanding of an entity's internal control system, an auditor may assess control risk at the maximum level for some account balances because he or she:

• A) identifies internal controls that are likely to prevent material misstatements.
• B) performs tests of controls to reduce detection risk to an acceptable level.
• C) determines that the pertinent internal control components are not well documented.
• D) believes the internal controls are unlikely to be operating effectively.

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Definitions:

Regent Diamond

A famous diamond originally found in India, known for its size, beauty, and colorful history of ownership.

French Crown Jewel

Precious gems and ornaments that once belonged to the royalties of France.

Indian Mine

A mining site located in India, potentially rich in minerals like coal, iron ore, or precious stones.

Slave

A person who is legally owned by another and is forced to work for them without the freedom to leave or to refuse work.