As a Result of Management's Refusal to Permit the Auditor

question 75

Multiple Choice

As a result of management's refusal to permit the auditor to physically examine inventory,the auditor has not accumulated sufficient evidence to conclude whether financial statements are stated in accordance with ASPE (Accounting Standards for Private Enterprises) .The auditor must depart from the unmodified audit report because

• A)the financial statements have not been prepared in accordance with GAAP.
• B)the scope of the audit has been restricted by circumstances beyond either the client's or auditor's control.
• C)the auditor has lost independence.
• D)the scope of the audit has been restricted by the client.

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Definitions:

Direct Materials

Basic substances utilized in the creation of a final product that can be directly attributed and identified within it.

Direct Labor

Direct labor refers to the employees and the associated labor costs directly involved in the manufacturing process of a company's products.

Prime Cost

The combined direct costs of raw materials and labor that are directly attributable to the production of a product.

Manufacturing Overhead

All manufacturing costs that are not directly associated with the production of a product, including indirect materials, labor, and other overhead expenses.