During the First Phase of an Audit,a CPA Most Likely

question 18

Multiple Choice

During the first phase of an audit,a CPA most likely would

• A) Identify specific internal control activities that are likely to prevent fraud.
• B) Evaluate the reasonableness of the client's accounting estimates.
• C) Evaluate the integrity of management.
• D) Inquire of the client's attorney as to whether any unrecorded claims are probable or asserted.

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Definitions:

Prompt Payment

A financial discipline that involves settling debts quickly, often rewarded by suppliers with discounts.

Purchase Returns

Transactions where buyers return previously purchased merchandise to the seller, often because of defects or errors in the shipment.

Returns

The process of a customer returning previously purchased merchandise back to the seller, or the amount of profit generated from an investment.

Gross Margin Ratio

A financial indicator that calculates the disparity between sales and the cost of goods sold, represented as a portion of sales revenue.