In Reporting on a Nonpublic Entity's Internal Control Over Financial

question 107

Multiple Choice

In reporting on a nonpublic entity's internal control over financial reporting,an accountant should include a paragraph that describes the

• A) Documentary evidence regarding the control environment factors.
• B) Changes in the entity's internal control since the prior report.
• C) Potential benefits from the accountant's suggested improvements.
• D) Inherent limitations of internal control.

---

Definitions:

Interest Tax Shield

The decrease in income tax liabilities due to permitted interest expense deductions.

Levered Firm

A corporation that has debt in its capital structure, indicating it uses borrowing (leverage) to finance its operations or expansions.

M&M Proposition I

A principle of financial theory stating that under perfect market conditions, the value of a firm is unaffected by how it is financed.

Liquidation

The process of converting assets into cash or cash equivalents by selling them in the market.