Assessing Design Effectiveness and Conducting Tests of Controls Are Required

question 30

Multiple Choice

Assessing design effectiveness and conducting tests of controls are required when the auditor

• A)chooses to set control risk below 100 percent and relies on the controls.
• B)chooses to set control risk below 100 percent even if there is no reliance placed on controls.
• C)is planning the audit.
• D)tests the design effectiveness.

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Definitions:

Machine-Hours

A measure used in accounting to allocate manufacturing overhead costs, representing the total hours that machines are operated in the production of goods.

Number of Batches

The total count of groups or sets of items processed or produced together in a manufacturing or production process.

Total Overhead Cost

The combined indirect costs associated with the normal operations of a business, such as administrative expenses, depreciation, and utilities.

Activity-Based Costing

Activity-based costing is an accounting methodology that assigns costs to products or services based on the activities and resources required to produce them, enhancing cost accuracy.