The Independent Auditor Should Acquire an Understanding of the Internal

question 22

Multiple Choice

The independent auditor should acquire an understanding of the internal audit function as it relates to the independent auditor's study and evaluation of internal control because the:

• A) audit programs, working papers, and reports of internal auditors can often be used as a substitute for the work of the independent auditor's staff.
• B) procedures performed by the internal audit staff may eliminate the independent auditor's need for an extensive study and evaluation of internal control.
• C) work performed by internal auditors may be a factor in determining the nature, timing, and extent of the independent auditor's procedures.
• D) understanding of the internal audit function is an important substantive test to be performed by the independent auditor.

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Definitions:

Goods and Services

Goods and services encompass all the physical items and intangible benefits that are produced and consumed to satisfy human wants and needs.

Factors of Production

Factors of production are the inputs used in the production of goods or services in the attempt to make an economic profit, including labor, capital, land, and entrepreneurship.

Circular-Flow Model

The circular-flow model is an economic diagram that illustrates how households and firms interact through markets for products and resources, depicting the continuous flow of money and resources.

Households

Economic units comprising individuals living together, making joint decisions about consumption and production.