David Killbear Has Been Involved in Testing Controls at Highbridge

question 55

Multiple Choice

David Killbear has been involved in testing controls at Highbridge Falls. Which of these control tests would be deemed ineffective?

• A) reading a client's policy manual
• B) entering invalid passwords to see whether access is denied
• C) both a and b
• D) none of the above are effective controls

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Definitions:

Fiscal Year

A one-year period that companies and governments use for financial reporting and budgeting, which may or may not align with the calendar year.

Straight-Line Depreciation

An approach to evenly spread the cost of a tangible asset throughout its period of use.

Time Period Assumption

The accounting principle that allows the business operations to be divided into specific time periods such as months, quarters, or years for reporting purposes.

Accrual Basis Accounting

An accounting method where revenue and expenses are recorded when they are earned or incurred, regardless of when the cash transaction actually takes place. This method provides a more accurate picture of a company's financial condition than cash basis accounting.