When Obtaining an Understanding of an Entity's Internal Control in a Financial

question 19

Multiple Choice

When obtaining an understanding of an entity's internal control in a financial statement audit of a nonpublic company,an auditor is not obligated to

• A) Determine whether control activities have been placed in operation.
• B) Perform procedures to understand the design of the internal control system.
• C) Document the understanding of the company's internal control system.
• D) Search for significant deficiencies in the operation of the internal control system.

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Definitions:

Individual Behavior

Actions and conduct exhibited by a person, influenced by individual attitudes, personality traits, and perceptions.

Stock Options

Financial derivatives that give the holder the right, but not the obligation, to buy or sell shares of a company at a specified price within a set time frame.

Granting Stock

The process by which a company offers shares of its stock to employees as part of their compensation package or as a reward.

Exercise Option

The act of implementing the right to buy or sell an asset under the terms of an option contract.