Tests of Controls Will Usually Be Carried Out

question 13

Multiple Choice

Tests of controls will usually be carried out:

• A)only by the audit engagement partner.
• B)at an interim date.
• C)only after year-end.
• D)by the client's board of directors.

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Definitions:

Payback Period

The time it takes for an investment to generate an amount of income or cash flows enough to cover the initial cost of the investment.

Salvage Value

The estimated value that an asset will realize upon its sale at the end of its useful life.

Net Cash Flows

The net amount of cash and cash equivalents moving into and out of a business within a specified period.

Payback Method

A capital budgeting technique that calculates the length of time required to recoup the initial investment cost through the net cash flows it generates.