When Performing an Audit, an Auditor Would Most Likely Be

question 40

Multiple Choice

When performing an audit, an auditor would most likely be considered negligent if they failed to:

• A)detect all of the client's fraudulent activities.
• B)include a negligence disclaimer in the client engagement letter.
• C)warn the client of any known internal control weaknesses.
• D)warn the client's customers of embezzlement by the client's employees.

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Definitions:

Consolidation Elimination

The process of removing intra-group transactions and balances from the consolidated financial statements of a group of companies.

Cost Method

An accounting approach for investments, where the investment is recorded at its acquisition cost without reflecting the investee's performance.

Straight Line Amortization

A technique for distributing the expense of an intangible asset evenly over its lifespan in yearly increments.

Goodwill

The intangible asset that arises when a company acquires another company for more than the fair value of its net identifiable assets.