In Obtaining an Understanding of the Internal Control Policies and Procedures

question 41

Multiple Choice

In obtaining an understanding of the internal control policies and procedures that are relevant to audit planning, the auditor should perform procedures to provide sufficient knowledge of:

• A)design of the relevant policies, procedures and records and their operating effectiveness.
• B)design of the relevant policies, procedures and records and their relationships to assertions.
• C)the complexity of the entity and the sophistication of its systems and operations.
• D)design of the relevant policies, procedures and records and whether they have been placed in operation.

---

Definitions:

Break-Even Point

The point at which total costs equal total revenue, meaning there is no profit or loss.

Total Sales

The aggregate revenue a company generates from selling goods or services within a specified period.

Fixed Costs

Costs that do not fluctuate with changes in production level or sales volume, such as rent, salaries, and insurance.

Margin Of Safety

The difference between actual or expected sales and the break-even point, indicating the level of risk in failing to cover fixed costs.