The Auditor Designs the Risk Assessment Procedures That He Believes

question 121

Multiple Choice

The auditor designs the risk assessment procedures that he believes will be effective in assessing the risk of material misstatement for the entity.According to the auditing standards,the risk assessment process should include

• A)inquiries of management about the ability of the client to generate sufficient cash to repay debt
• B)tests of controls
• C)observation and inspection
• D)substantive test of transactions

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Definitions:

Plant and Equipment

Tangible long-term assets owned by a firm, used in the production or supply of goods and services, such as machinery and buildings.

Functional Currency

The primary currency used by a business or entity in its operations and financial reporting.

Translation Rate

The exchange rate used in translating the financial statements of a foreign entity into the functional currency for reporting purposes.

Functional Currency

The currency of the primary economic environment in which an entity operates, typically used in preparing financial statements.