Which of the Following Emerge as a Problem When Auditors

question 27

Multiple Choice

Which of the following emerge as a problem when auditors rely on internal control evidence rather than engage in detail testing when performing an audit?

• A)internal controls rarely apply to management activities or decisions
• B)companies use internal controls for estimation transactions
• C)auditors who rely on internal controls may neglect transactions that are routine
• D)management can often override internal controls
• E)both A and D
• F)both B and E
• G)both C and E

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Definitions:

Cash Cycle

The period between the outflow of cash for the purchase of raw materials and the inflow of cash from the sale of goods or services, reflecting the time it takes for a business to convert its investment in inventory back into cash.

Accounts Receivable Period

The amount of time it takes for a company to collect payment from its customers after a sale has been made, indicative of the company's efficiency in collecting its receivables.

Inventory Item

refers to any product or goods that a company holds in stock with the intention of selling it to customers.

Inventory Period

The average time it takes for a company to turn its inventory into sales, indicating how quickly products are sold.