After Obtaining an Understanding of Internal Control in an Audit

question 43

Multiple Choice

After obtaining an understanding of internal control in an audit engagement, the auditor should perform tests of controls on:

• A) those control activities for which reportable conditions were identified.
• B) a random sample of the control activities that were identified.
• C) those control activities that have a material effect upon the financial report balances.
• D) those control activities that the auditor identified to reduce the assessed level of control risk.

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Definitions:

Marginal Utility

The additional gain in enjoyment or utility that an individual experiences from consuming one more unit of a good or service.

Indifference Curve

A graphical representation in economics of all combinations of goods that provide a consumer with the same level of satisfaction or utility.

Budget Constraint

The cap on the selection of consumption options accessible to a consumer, influenced by their income level and the pricing of commodities.

Utility Maximizing

A principle in economics where individuals or entities aim to achieve the highest level of satisfaction with their choices, given their resources.