Which of the Following Is a Reason Why an Auditor

question 16

Multiple Choice

Which of the following is a reason why an auditor needs an understanding of internal controls?

• A)To provide individual comments on internal control non-compliance.
• B)To become comfortable that the client will pay its audit bills.
• C)To assess materiality.
• D)To assess the risk of possible misstatements in the financial statements.

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Definitions:

Cost Of Goods Sold

The total expense incurred by a business to manufacture or acquire products that were sold during a specific period.

Profit Margin

A financial metric indicating the percentage of revenue that exceeds the costs associated with making or selling products.

Profitability

A financial metric used to assess the ability of a business to generate earnings relative to its revenue, assets, equity, or other financial metrics.

Liquidity

How effortlessly an asset can be turned into cash without altering its market price.