Which of the Following Is Not a Reason That the Auditor

question 20

Multiple Choice

Which of the following is not a reason that the auditor must gain an understanding of the client's internal control system?

• A)Better understand the client,its risks,and how it manages those risks.
• B)Assess control risk and identify the types of financial statement misstatements that are most likely to occur.
• C)Plan direct tests of account balances to determine if misstatements have occurred.
• D)All are reasons why auditors must gain an understanding of the client's internal control system.

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Definitions:

Average Operating Assets

The average value of the assets used by a business in its operational activities over a period of time, used to measure efficiency and profitability.

Interest Expense

The cost incurred by an entity for borrowed funds, including loans, bonds, or lines of credit.

Tax Expense

The total amount of taxes a company incurs on its taxable income, including federal, state, and local taxes.

Net Operating Income

A financial metric that calculates a company's profit after all operating expenses are subtracted from total revenue.