Each Working Paper Should Include Enough Information to Fulfill the Objectives

question 71

Multiple Choice

Each working paper should include enough information to fulfill the objectives for which it was designed.For example,if a working paper is designed to list the detail and show the verification of support of a balance sheet account such as prepaid insurance,it is essential that the detail on the working paper

• A)reconcile the change in costs from last year to this year.
• B)use analytical review to consider the reasonableness of the account.
• C)reconcile with the associated general ledger account.
• D)use observation to identify controls in place over the transactions.

Calculate expected outcomes and make recommendations based on economic models involving risks and uncertainties in business operations.

Evaluate the role of effort and its costing in employee performance and its effect on firm revenues.

Understand and apply the concept of moral hazard and adverse selection in business environments.

Identify the factors affecting the choice between different operational strategies, such as quality differentiation and market signaling.

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Definitions:

Variable Costs

Costs that vary directly with the level of production or output.

Fixed Costs

Fixed expenses that are unaffected by the amount of goods produced or sold, for example, rent, salaries, and insurance payments.

Profit

Profit is the financial gain obtained when the amount earned from a business activity exceeds the expenses, costs, and taxes needed to sustain the activity.

Operating Income

Income generated from a company's regular business operations, excluding one-time events and expenses.