Which of the Following Is a Difference Between Audits and Compilations

question 17

Multiple Choice

Which of the following is a difference between audits and compilations?

• A) The auditor's objective is to obtain reasonable assurance that the financial statements are free of material misstatements, whereas the objective of a compilation is to assist management in presenting financial information without obtaining any level of assurance.
• B) Audits do not require an understanding of the entity's internal controls and an assessment of fraud risk, whereas compilations require an understanding of the entity's internal controls and an assessment of fraud risk.
• C) Audits have a narrower scope as compared to reviews, whereas compilations have a broader scope as compared to reviews.
• D) Audits provide a reasonable level of assurance to the users of the financial statements, whereas compilations provide a limited level of assurance to the users of the financial statements.

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Definitions:

Average Propensity

The average tendency of an entity (such as a household) to spend a portion of income; can pertain to consumption or saving.

Disposable Income

Disposable income is the portion of an individual's or household's earnings left over for savings and expenditures after paying off income taxes.

Autonomous C

Autonomous consumption, the level of spending not influenced by current levels of income.

Induced C

Induced consumption, which refers to the spending by households that varies with income levels.