Auditors Begin Their Assessments of Inherent Risk During Audit Planning

question 62

Multiple Choice

Auditors begin their assessments of inherent risk during audit planning.Which of the following would not help in assessing inherent risk during the planning phase?

• A)Obtaining client's agreement on the engagement letter
• B)Obtaining knowledge about the client's business and industry
• C)Touring the client's plant and offices
• D)Identifying related parties

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Definitions:

Notes Payable

This refers to a written promise to pay a certain amount of money, usually including interest, by a specific date, and is recognized as a liability on a company's balance sheet.

Effective Interest Method

An accounting practice used to allocate loan or bond interest expense over the life of the loan or bond based on the loan's amortized cost.

Interest Payment

The amount paid by a borrower to a lender as compensation for the use of borrowed money, usually expressed as a percentage of the principal amount.

Premium on Bonds Payable

The amount by which the bond's selling price exceeds its face value, representing an additional cost to the issuer.