The Primary Purpose of the Auditors' Study of Internal Control

question 37

Multiple Choice

The primary purpose of the auditors' study of internal control for a nonpublic entity is:

• A)To provide constructive suggestions to the client for improving its internal control.
• B)To report on internal control as required by Auditing Standard No.5.
• C)To identify and detect fraud and irregularities perpetrated by client personnel.
• D)To determine the nature,timing,and extent of further audit procedures.

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Definitions:

Total Assets Turnover

A financial ratio that measures how effectively a company uses its total assets to generate sales revenue.

Net Working Capital

The difference between a company's current assets and current liabilities, indicating its short-term financial health.

Current Assets

Assets that are expected to be converted into cash, sold, or consumed within a year's time, such as cash, inventory, and receivables.

Current Liabilities

Short-term financial obligations that a company owes and is expected to pay within one year or its operational cycle, whichever is longer.