Based on a Study and Evaluation Completed at an Interim

question 52

Multiple Choice

Based on a study and evaluation completed at an interim date, the auditor concludes that no significant internal accounting control weaknesses exist.The records and procedures would most likely be tested again at year-end if:

• A)the internal accounting control system provides a basis for reliance in reducing the extent of substantive testing.
• B)tests of controls were not performed by the internal auditor during the remaining period.
• C)enquiries and observations lead the auditor to believe that conditions have changed.
• D)the auditor used non-statistical sampling during interim compliance testing.

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Definitions:

Financing Activities

Transactions that result in changes in the size and composition of the equity capital or borrowings of the entity.

Common Stock

Equity securities representing ownership in a company, entitling holders to vote on corporate matters and receive dividends.

Deferred Tax Liability

A tax obligation that a company owes in the future due to temporary differences between its financial accounting and tax accounting practices.

Indirect Method

A method used in cash flow statements to adjust net income for non-cash transactions and changes in working capital to calculate cash flow from operating activities.