An Auditor Wishes to Perform Tests of Controls on a Client's

question 25

Multiple Choice

An auditor wishes to perform tests of controls on a client's cash disbursements procedures. If the control activities leave no audit trail of documentary evidence, the auditor most likely will test the activities by:

• A)confirmation and observation.
• B)observation and inquiry.
• C)analytical procedures and confirmation.
• D)inquiry and analytical procedures.

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Definitions:

Lenders

Individuals, institutions, or entities that provide funds to borrowers under the condition of repayment with interest within a specified timeframe.

Convertible Bond

A type of bond that can be converted into a predetermined number of shares of the issuing company's stock.

Straight Bond Value

The value of a convertible bond if it could not be converted into common stock.

TWX Call Option

An option contract that gives the holder the right, but not the obligation, to buy Time Warner Inc. (TWX) stock at a specified price within a certain time period.