The Major Limitation with the Observation Technique for Testing Controls

question 5

Multiple Choice

The major limitation with the observation technique for testing controls is that:

• A) the employee may not be truthful in telling the auditor how the control procedure is performed.
• B) the employee may perform the control procedure more diligently when they know they are being observed.
• C) Both a and b
• D) none of the above.

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Definitions:

Interest

Payment made for the use of borrowed money, calculated as a percentage of the principal sum.

Simple Interest

Interest calculated only on the initial amount of money (principal), not on the interest accrued over time.

Investment

Allocation of resources, such as time, money, or effort, in hope of generating a future benefit or return.

Interest Rate

The interest percentage applied on the sum of money borrowed by an individual from a financial lender.