Auditors Can Assess the Adequacy of Their Client's Closing Procedurby

question 32

Multiple Choice

Auditors can assess the adequacy of their client's closing procedurby:

• A) Checking the accuracy of accrual calculations around year-end.
• B) Looking at earnings trends to assess whether reported income is in line with similar periods in prior years.
• C) a and b.
• D) None of the above.

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Definitions:

Legal Reserve Requirement

A regulation set by central banks determining the minimum amount of reserves that must be held by a financial institution, usually a percentage of deposits.

Federal Funds Rate

The interest rate at which depository institutions trade federal funds (balances held at Federal Reserve Banks) with each other overnight.

Required Reserves

The minimum amount of funds that a bank must hold in reserve against deposit account liabilities, as mandated by the central bank, to ensure bank liquidity.

Demand Deposits

Bank accounts that allow the holder to withdraw funds without advance notice, such as checking accounts.