An Independent CPA Is Conducting an Audit of an Entity

question 60

Multiple Choice

An independent CPA is conducting an audit of an entity that receives federal financial assistance and is subject to the GAO standards (GAGAS) . The auditor must design the audit to provide reasonable assurance of detecting which of the following?

• A) Immaterial misstatements, if they result from illegal acts.
• B) Noncompliance with entity policies and procedures.
• C) Noncompliance with the terms of contracts or grant agreements.
• D) All of the above.

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Definitions:

Efficiency Variance

The difference between the actual input used in production and the standard input that was expected to be used.

Spending Variance

The difference between the actual amount spent and the budgeted amount for a category or period, indicating over or underspending.

Quantity Variance

The difference between the actual quantity of materials or labor used in production and the expected (or standard) quantity.

Overhead Cost Variance

The difference between the actual overhead costs incurred and the standard or expected overhead costs.