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:

Customers

People or companies that buy products or services from a business.

Collection Time

The average period that a company takes to collect cash from its credit sales.

Cheques

A document that is written, dated, and signed, which gives an absolute command to a bank to pay a specific amount of money to the recipient.