Question

3.              Which of the following statements about understanding internal control is not true:                a. T

3.              Which of the following statements about understanding internal control is not true:

               a. The auditor uses the knowledge of the system of internal control to design further audit procedures to collect evidence.

               b. In the presence of a strong system of internal control, the auditor may choose to collect less evidence about transactions or balances.

               c. In the audit of a private company, it is necessary to express an opinion on the system of internal control over financial reporting.

               d. A thorough understanding of the system of internal control assists the auditor in identifying potential types of misstatements.

               e. A thorough understanding of the system of internal control assists the auditor in understanding the risk of material misstatements.

                               

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Answer #1

Correct Option C i.e.. In the audit of a private company, it is necessary to express an opinion on the system of internal control over financial reporting.

Reason: it is necessary to express an opinion on the system of internal control over financial reporting in Public company and not in private company. Because quantum of stakeholders in public company are much higher than private company. Any major deficiency in internal control of public compaany will effect numerous people.

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