An Audit by an Independent External Auditor Usually Does Not

question 121

Multiple Choice

An audit by an independent external auditor usually does not involve which of the following?

• A)an assessment of the capability of a firm's accounting system to accumulate, measure, and synthesize transactional data properly.
• B)an assessment of the operational effectiveness of the accounting system
• C)a determination of whether the financial report complies with the requirements of the applicable authoritative guidance
• D)an assessment of the operational economy, efficiency, and effectiveness of the company's operations
• E)an assessment of the effectiveness of a firm's internal control system for financial reporting.

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Definitions:

Investment Turnover

A measure of a company's efficiency in using its invested capital to generate revenues, often calculated as sales divided by the average invested capital.

Invested Assets

Assets that have been contributed or used by investors in the hope of generating future returns, often through interest, dividends, or appreciation in value.

Investment Center Performance

The evaluation of a unit within a company by measuring its profitability and the return on assets it controls.

Controlling Investment

A significant ownership stake in a company that grants the investor the power to influence or direct the company's decisions.