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

question 39

Multiple Choice

After obtaining an understanding of an entity's internal control system, an auditor may assess control risk at a high 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:

Forge

To form or shape metal objects by heating and hammering, or to create or produce something with skill and careful attention.

For Deposit Only

An endorsement on a check specifying that the check must be deposited into an account and cannot be cashed directly.

Negotiation

The process of discussing things with others to reach an agreement, compromise, or settlement.

Order

An authoritative command, direction, or instruction, typically issued by a court or by someone in a position of power.