Where an Auditor Concludes That the Audit Client's Systems of Internal

question 56

Multiple Choice

Where an auditor concludes that the audit client's systems of internal controls are ineffective, he/she will

• A) conclude that the client's system of internal controls can be relied upon to detect potential material misstatements.
• B) conclude that the client's system of internal controls cannot be relied upon to detect potential material misstatements.
• C) reduce the amount of reliance to be placed on substantive tests.
• D) project the misstatements to the entire population.

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Definitions:

Revenue Formulas

Mathematical expressions or models used to calculate a company's earnings from its operations over a period.

Planning Budget

A forecast of income and expenditure over a specified future period, used to guide the financial direction of a business.

Budgeting

The process of creating a plan to allocate resources (revenue and expenses) for a specific period, typically used for financial planning and control.

Activity Variances

Differences between the planned or budgeted amounts of costs and revenues and the actual amounts incurred, driven by variations in business activities.