Auditors Begin Their Assessments of Inherent Risk During the Planning

question 76

Multiple Choice

Auditors begin their assessments of inherent risk during the planning phase. Which of the following would NOT be a topic of the planning phase that would also help to assess inherent risk?

• A) Obtaining client's agreement on the engagement letter
• B) Identifying related parties
• C) Obtaining knowledge about the client's business and industry
• D) Touring the client's plant and offices

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Definitions:

Normal Costing System

An accounting system that assigns costs to products based on the normal levels of materials, labor, and overhead.

Inventory Accounts

Accounts used to track the cost of goods a company has in stock during an accounting period, including raw materials, work in progress, and finished goods.

Actual Overhead Costs

The real costs that a company incurs for its indirect materials, indirect labor, and other overhead expenses.

Direct Labour Cost

The wages and benefits paid to workers who are directly involved in the manufacturing process.