When the Auditor Decidto Include Controls Testing in Their Audit

question 16

Multiple Choice

When the auditor decidto include controls testing in their audit strategy, they select those controls that:

• A) are the easiest to test.
• B) provide the most efficient and effective audit evidence.
• C) provide no assurance that the controls operated effectively throughout the period of reliance.
• D) provide the least efficient and effective audit evidence.

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Definitions:

Operating Activities

Transactions and events related to the core business functions, including revenue and expense activities that affect net income on the income statement.

Direct Method

A method for creating the cash flow statement by directly listing the actual cash flows associated with operating activities.

Operating Activities

Business actions that are involved in the day-to-day functions of producing goods, offering services, and other core operations.

Direct Method

A way of allocating service department costs directly to production departments without any consideration for services rendered between service departments.