When the Auditor Is Obtaining an Understanding of a Service

question 17

Multiple Choice

When the auditor is obtaining an understanding of a service center's internal controls the auditor should:

• A) use the same criteria used to evaluate the client's internal controls.
• B) use different criteria because the service center resides outside the company.
• C) use the same criteria used to evaluate the client's internal controls but omit tests of transactions.
• D) use different criteria for the service center by including substantive tests of balances.

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Definitions:

Limited Partners

Investors in a partnership who are only liable for the debts or losses of the business up to the amount they have invested, without involvement in day-to-day management.

Informal Investor

An individual who provides financial backing for small startups or entrepreneurs, often a friend, family member, or business associate, outside of the formal venture capital or banking framework.

High-Technology Inventors

Individuals or groups involved in the creation or development of new products or innovations in high-tech industries.

Prototype

An early sample, model, or release of a product built to test a concept or process, serving as a thing to be replicated or learned from.