All of the Following Are Required by the Auditor Before

question 39

Multiple Choice

All of the following are required by the auditor before allowing the client to take inventory before year-end except which one?

• A)absence of "red flags".
• B)internal control is weak.
• C)the auditor can effectively test the year-end balance through a combination of analytical procedures and selective testing of transactions between the physical count and the year-end.
• D)the auditor reviews the intervening transactions for evidence of any manipulation or unusual activity.

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Definitions:

Asymmetric Information

A situation in which one party in a transaction has more or superior information compared to another. This can lead to an imbalance in power and potentially unfair transactions.

Genetic Tests

Procedures used to identify changes in chromosomes, genes, or proteins to predict disease risk, diagnose diseases, or identify carriers of disease.

Mechanism Design

An area of economics that explores how contract or transaction structures can overcome asymmetric information problems.

Welfare Reform

Changes to the social welfare policy aiming to improve the social safety net and reduce welfare dependency through various measures, including work requirements.