The Primary Purpose for Obtaining an Understanding of the Entity's

question 55

Multiple Choice

The primary purpose for obtaining an understanding of the entity's environment (including its internal control) in a financial statement audit is

• A) To determine the nature, timing, and extent of substantive procedures to be performed.
• B) To make consulting suggestions to the management.
• C) To obtain direct sufficient appropriate audit evidence to afford a reasonable basis for an opinion on the financial statements.
• D) To determine whether the entity has changed any accounting principles.

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Definitions:

Title Passes

The point at which ownership of property is transferred from one party to another according to the terms of a contract.

Goods Arrive

The event or process where purchased or ordered products reach their destination or the buyer's location.

Fungible Goods

Goods of which any unit is identical from another and can be substituted, such as grains, fuels, or money.

Equivalent Unit

A concept in cost accounting used to express the amount of work in progress inventory in terms of fully completed units of output.