Which of the Following Procedures Is Usually the First Step

question 63

Multiple Choice

Which of the following procedures is usually the first step in reviewing the financial statements of a nonpublic entity?

• A)Make preliminary judgments about risk and materiality to determine the scope and nature of the procedures to be performed.
• B)Obtain a general understanding of the entity's organization,its operating characteristics,and its products or services.
• C)Assess the risk of material misstatement arising from fraudulent financial reporting and the misappropriation of assets.
• D)Perform a preliminary assessment of the operating efficiency of the entity's internal control activities.

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Definitions:

Lack of Control

A situation where an individual feels they do not have the power or ability to influence the outcomes or events in their life.

Poor Leadership

The ineffectiveness of leaders to inspire, guide, or manage a team, resulting in negative outcomes for the organization or entity they lead.

Role Conflict

Occurs when there are incompatible demands placed upon a person, causing stress and difficulty in satisfying multiple roles simultaneously.

Extreme Environments

Conditions that are significantly different from the norm, often challenging for survival or operation, such as deep sea, space, or desert locations.