Tests Done by the Auditor That Are Referred to as Internal

question 48

Multiple Choice

Tests done by the auditor that are referred to as internal control tests determine whether

• A)the financial statements are materially misstated
• B)the balance sheet is materially misstated
• C)the internal controls are the responsibility of management
• D)the internal controls of the company prevent or detect misstatements in the financial statements

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Definitions:

Accrual Method

A bookkeeping approach that registers revenues and costs as they are accrued or realized, irrespective of the timing of the associated cash transactions.

Taxable Income

The amount of income that is subject to income tax after deductions and exemptions.

Corporate Income Tax Rate

The percentage of corporate profits that are paid to the government as income tax.

Interperiod Tax Allocation

The accounting practice of distributing income taxes equally among the different periods affected by temporary differences.