Which of the Following Factors Would Lead an Auditor to Assess

question 48

Multiple Choice

Which of the following factors would lead an auditor to assess inherent risk at a higher level?

• A)The account balance is easily determined without estimation.
• B)The account balance represents an easily embezzled asset.
• C)The account balance is composed of simple transactions.
• D)All of the above would lead the auditor to assess a higher level of inherent risk.

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Definitions:

Direct Labor Time Variance

The difference between the actual hours spent on production and the standard hours expected, multiplied by the standard hourly wage rate.

Actual Costs

are the genuine expenditures incurred in the production or acquisition of goods and services, as opposed to estimated or standard costs.

Standard Costs

Pre-determined or benchmark costs for products, operations, or activities, used for budgeting purposes and performance evaluation against actual costs.

Direct Labor Time Variance

The difference between the actual time taken to perform work and the estimated standard time, adjusted for units produced.