When Auditing a Private Company, the Auditor Should Obtain an Understanding

question 65

Multiple Choice

When auditing a private company, the auditor should obtain an understanding of internal control sufficient to:

• A)provide reasonable protection against client fraud and defalcations by client employees.
• B)assess control risk.
• C)provide a basis for suggestions to the client for improving the accounting system.
• D)provide a method for safeguarding assets, checking the accuracy and reliability of accounting data, promoting operational efficiency, and encouraging adherence to prescribed managerial policies.

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Definitions:

Sampling Distribution

The spectrum of probabilities for a predetermined statistic, collected from a random sample.

Probability Density Function

A function that describes the likelihood of obtaining the possible values that a random variable can assume, used in continuous probability distributions.

Finite Population Correction Factor

A correction applied to standard errors or variances when sampling from a finite population without replacement, to account for the decreased variability.

Population Mean

The average of all the values in a population, calculated as the sum of all values divided by the number of values.