If the Auditor Does Not Obtain a Cutoff Statement Directly

question 29

Multiple Choice

If the auditor does not obtain a cutoff statement directly from the bank for testing,an alternative procedure that the auditor can use is to

• A)account for a continuity of cheques that covers the year end.
• B)reconcile cash paid to the cash disbursements journal for the last month of the year.
• C)reconcile cash received to the cash receipts journal for the last month of the year.
• D)prove the bank statement for the period after the year end.

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Definitions:

Activity-based Costing

A costing method that assigns overhead and indirect costs to specific activities, improving the accuracy of product and service pricing.

Idle Capacity

Unused production capability or facilities that could be used to produce more goods but are not currently being utilized due to lack of demand or efficiency.

Plantwide Overhead Rate

A single overhead rate calculated by dividing total manufacturing overhead costs by the total allocation base for the entire plant.

Activity-based Costing

A method in accounting that identifies the activities in an organization and assigns the cost of each activity to all products and services according to the actual consumption by each.