In an Audit of Financial Statements of a Private Company

question 73

Multiple Choice

In an audit of financial statements of a private company in accordance with generally accepted auditing standards,an auditor is required to

• A) Identify specific internal control activities relevant to management's financial statement assertions.
• B) Perform tests of controls to evaluate the effectiveness of the entity's accounting system.
• C) Determine whether procedures are suitably designed to prevent or detect material misstatements.
• D) Document the auditor's understanding of the entity's internal control.

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Definitions:

Supply Chain

A network of organizations, people, activities, information, and resources involved in producing and delivering a product or service from supplier to customer.

Occupancy Cost

The total expense incurred for occupying a physical space, including rent, utilities, taxes, and maintenance.

Cycle Inventory

The portion of inventory that a business holds to meet its regular sales demand during a specific period.

Space Cost

Expenses related to the physical space required for operations, such as warehousing or retail locations.