ASA 500 Requires Auditors to Accumulate Sufficient Appropriate Evidence to Support

question 59

Multiple Choice

ASA 500 requires auditors to accumulate sufficient appropriate evidence to support the opinion issued. Because of the nature of audit evidence, it is:

• A) unlikely the auditor will be completely convinced that the opinion is correct.
• B) likely that the auditor would change his or her mind about the opinion if he or she took the time to gather additional evidence.
• C) unlikely the auditor will arrive at a conclusion.
• D) likely the auditor will be completely convinced that the opinion is correct.

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Definitions:

Direct Labor Costs

Expenses associated with employees who directly contribute to the manufacturing or production of goods in a company.

Annual Overhead Costs

The total expenses not directly tied to a product or service's production, incurred over a year, such as rent, utilities, and insurance.

Activity Base

A measure used in cost accounting to assign costs to various activities, often driving the allocation of overhead.

Overhead Application

The process of allocating indirect costs to specific cost objects, such as products or departments.