As Part of an Audit, a CPA Often Requests a Representation

question 12

Multiple Choice

As part of an audit, a CPA often requests a representation letter from the entity. Which one of the following is not a valid purpose of such a letter?

• A) To provide audit evidence.
• B) To emphasize to the entity their responsibility for the fairness of the financial statements.
• C) To satisfy himself or herself that a certain account balance is fairly stated when certain customary auditing procedures are not performed.
• D) To provide possible protection to the CPA against a charge of knowledge in cases where fraud is subsequently discovered to have existed in the accounts.

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Definitions:

Price/Demand Elasticity

The measure of how much the demand for a product or service changes in response to a change in its price.

Reduced Gradient

A numerical optimization method that calculates the direction in which an objective function should be modified to achieve the quickest improvement, considering constraints as gradients as well.

Nonlinear Optimization

The process of maximizing or minimizing an objective function that is nonlinear in its variables, subject to constraints.

Reduced Cost

In optimization, the amount by which an objective function's value could decrease by increasing a non-basic variable by one unit.