Auditors Test the Operating Effectiveness of Internal Controls Only If

question 25

Multiple Choice

Auditors test the operating effectiveness of internal controls only if they

• A) are effectively designed to prevent or detect material misstatements.
• B) address multiple risk factors.
• C) are applied in conjunction with other controls to address a single risk factor.
• D) cause susceptibility to material misstatements.

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Definitions:

Organization Levels

Refers to the hierarchy within an organization, starting from the top with the board of directors or CEO, moving down through middle management, and reaching the operational employees at the bottom.

Centralization

The concentration of decision-making authority at the top levels of an organizational hierarchy.

Operational Decisions

Short-term choices made by management which are concerned with the day-to-day operations of a business.

Software Solutions

Customized or off-the-shelf computer programs designed to meet specific user needs or solve particular problems.