An Independent CPA Is Conducting an Audit of an Entity

question 54

Multiple Choice

An independent CPA is conducting an audit of an entity that is subject to the GAO audit standards, but is not subject to the OMB audit standards. While conducting the audit, the CPA found that the entity had violated a law that had a large, but not material, potential penalty associated with such violation. There was no accrual for the potential penalty or disclosure of the violation. What action(s) must the CPA take with regard to this violation?

• A) Nothing, since the financial statements are not materially misstated.
• B) Must issue an adverse opinion if the financial statements are not changed to reflect the violation.
• C) Must issue a report that details the violation and the potential dollar effect.
• D) Must report the incident to the local law enforcement agency.

Identify and explain the different types of variances, including price, quantity, rate, time, and volume variances.

Apply variance analysis in the context of managerial accounting to control costs and improve operational efficiency.

Interpret the significance of favorable and unfavorable variances in standard costing.

Differentiate between fixed and variable overhead costs and their impact on costs control.

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Definitions:

Price Received

The amount of money paid to a producer or seller for a product or service.

Production Function

A mathematical model describing the relationship between input factors (like labor and capital) and output, indicating how much can be produced with given resources.

Supply Function

A mathematical relation showing the quantity of a good that producers are willing and able to sell at different prices, holding other factors constant.

Factor Price

The price paid for the use of a factor of production, such as labor, land, or capital.