Control Risk Is a Measure of the Auditor's Expectation That

question 55

Multiple Choice

Control risk is a measure of the auditor's expectation that the internal controls:

• A) will prevent material misstatements from occurring.
• B) will either prevent material misstatements or detect and correct them.
• C) will detect and correct material misstatements.
• D) will neither prevent material misstatements nor detect and correct them.

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Definitions:

Overhead Rate Methods

Different methodologies used to allocate overhead costs to products or services based on criteria such as direct labor hours, machine hours, or direct material costs.

Departmental Overhead Rate

This rate is used to allocate indirect costs to specific departments, based on a relevant metric like labor hours or machine hours.

Activity-Based Costing

A pricing strategy that tracks the various tasks performed within a company, allocating the associated costs to different products and services in proportion to their direct usage.

Cost Flows

The movement and allocation of costs within an accounting system, often associated with manufacturing processes.