Which of the following statements concerning an auditor's communication of significant deficiencies identified during the financial statement audit of a nonissuer is correct?
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1 .Which of the following terms refers to a performance measurement that is calculated as an investment center’s after-tax operating income minus the product of its total assets multiplied by the company’s weighted average cost of capital (WACC)?
A Return on investment. B Economic value added. C Net realizable value. D Profitability index.
2 .With respect to the audit of a nonissuer, significant deficiencies are matters that come to an auditor's attention, which should be communicated to an entity's management and those charged with governance because they represent:
A Material irregularities or illegal acts perpetrated by high-level management. B Intentional attempts by client personnel to limit the scope of the auditor's fieldwork. C Deficiencies in the design or operation of internal control that are important enough to merit attention by those responsible fo...
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A USD(6,000) B USD6,000 C USD12,000 D USD(12,000)
4 .Which of the following statements describes an auditor's obligation to identify deficiencies in the design or operation of internal control in a financial statement audit of a nonissuer?
A The auditor should design and apply tests of controls to discover significant deficiencies in internal control that could result in material misstatements. B The auditor need not search for significant deficiencies in internal control but should document and communicate any such deficiencies that ...
5 .Average daily cash outflows are USD3 million for Evans Inc. A new cash management system can add two days to the disbursement schedule. Assuming Evans earns 10 percent on excess funds, how much should the firm be willing to pay per year for this cash management system?
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7 .The CFO of a company is concerned about the company's accounts receivable turnover ratio. The company currently offers customers terms of 3/10, net 30. Which of the following strategies would most likely improve the company's accounts receivable turnover ratio?
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8 .Snow, CPA, was engaged by Master Co., a nonissuer, to examine and report on management's written assertion about the effectiveness of Master's internal control over financial reporting. Snow's report should state that:
A Management's assertion is based on criteria established by the American Institute of Certified Public Accountants. B The results of Snow's tests of controls will form the basis for Snow's opinion on the fairness of Master's financial statements in conformity with GAAP. C Because of its inherent li...
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A Purchasing inventory through the issuance of a long-term note. B Selling obsolete inventory at a loss. C Implementing stronger procedures to collect accounts receivable at a faster rate. D Paying an existing account payable.
10 .Which of the following matters is an auditor required to communicate to those charged with governance?
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