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fluctuations. What is the audit purpose most directly served by obtainingthis understanding?a.To assist the auditor to accurately interpret information obtainedduring an audit.b.To allow the auditor to more accurately perform tests of controls.c.To decide whether it will be necessary to perform analyticalprocedures.d.To enable the auditor to accurately identify significant deficiencies.ExplanationChoice "a" is correct. As part of audit planning, the auditor should obtainan understanding of the entity's business. This understanding enablesthe auditor to better understand events, transactions, and practices thatmay affect the financial statements, to plan and perform appropriateaudit tests, and to properly understand and evaluate the results of thosetests.Choice "d" is incorrect. Obtaining an understanding of the entity'sbusiness would not be particularly helpful in identifying significantdeficiencies. Significant deficiencies in internal control are typicallyidentified during the fieldwork stage of the audit.Choice "b" is incorrect. Obtaining an understanding of the entity'sbusiness would not result in a more accurate performance of tests ofcontrols. Accurate performance of audit tests is dependent upon factorssuch as existence of an appropriate audit trail, client cooperation,training and supervision of audit staff, etc.Choice "c" is incorrect. Analytical procedures are always required in anaudit during the planning and overall review stages.
Page 1 of 2Becker Professional EducationRegistered to: Dominique DAntonioQuestion CPA-03405Initially the nominal interest rate is 8 percent and the inflation rate is 6percent. One year later, the nominal interest rate rises to 12 percentwhile the inflation rate rises to 10 percent. It follows that the real rate ofinterest:a.Insufficient information given for an answer.b.Has risen.c.Has remained the same.d.Has fallen.ExplanationChoice "c" is correct. The real interest rate equals the nominal interestrate minus the inflation rate. Thus, the real interest rate in the first yearis: real interest rate = 8% −6% = 2% and the real interest rate in thenext year is: real interest rate = 12% −10% = 2%.
Page 1 of 2Becker Professional EducationRegistered to: Dominique DAntonioQuestion CPA-03489Under monopoly, strategic plans focus on:a.Profitability from production levels that maximize profits.b.Maintaining the market share and being responsive to marketconditions related to sales price.c.Maintaining the market share, ensuring product differentiation, andadapting to price changes or required changes in productionvolume.d.Maintaining the market share and planning for enhanced productdifferentiation.ExplanationChoice "a" is correct. Under monopoly, strategic plans ignore marketshare and focus on profitability from production levels that will maximizeprofits.