Maxi Sales Corp

question 26

Multiple Choice

Maxi Sales Corp. maintains a large, full-time internal audit staff that reports directly to the chief accountant. Audit reports prepared by the internal auditors indicate that the structure is functioning as it should be and that the accounting records are reliable. The external auditor will probably:

• A) eliminate tests of controls.
• B) increase the depth of the procedures to obtain an understanding of controls directed towards operating efficiency.
• C) avoid duplicating the work performed by the internal audit staff.
• D) place limited reliance on the work performed by the internal audit staff.

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Definitions:

Crowding-out Effect

A situation where increased government spending leads to a reduction in private sector spending, either through higher taxes, higher interest rates, or borrowing.

Crowding-out Effect

A situation where increased government spending leads to a reduction in private sector investment.

Multiplier Effect

An economic phenomenon where an increase in spending produces an increase in national income and consumption greater than the initial amount spent.

Aggregate Demand

The aggregate market demand for goods and services in an economic environment, valued at a specific price level within a certain timeframe.