When Auditing a Private Company, the Auditor Should Obtain an Understanding

question 65

Multiple Choice

When auditing a private company, the auditor should obtain an understanding of internal control sufficient to:

• A)provide reasonable protection against client fraud and defalcations by client employees.
• B)assess control risk.
• C)provide a basis for suggestions to the client for improving the accounting system.
• D)provide a method for safeguarding assets, checking the accuracy and reliability of accounting data, promoting operational efficiency, and encouraging adherence to prescribed managerial policies.

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Definitions:

Share

A unit of ownership interest in a corporation or financial asset that provides for an equal distribution in any profits, if any are declared, in the form of dividends.

Democracy

A form of government in which power is vested in the people, who rule either directly or through freely elected representatives.

Alexander Tytler

A Scottish historian and writer often cited, sometimes inaccurately, in discussions about democracy and societal cycles.

Excessive Debt

A situation where an individual or entity has more debt than they can manage or repay in a reasonable timeframe.