When Testing a Company's Cost Accounting System, the Auditor Uses

question 8

Multiple Choice

When testing a company's cost accounting system, the auditor uses procedures that are primarily designed to determine that

• A)quantities on hand have been computed based on acceptable cost accounting techniques that reasonably approximate actual quantities on hand.
• B)physical inventories agree substantially with book inventories.
• C)the system is in accordance with generally accepted accounting principles and is functioning as planned.
• D)costs have been properly assigned to finished goods, work-in-process, and cost of goods sold.

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Definitions:

Industrial Revolution

A period of major industrialization that took place during the late 1700s and early 1800s, leading to significant changes in technology, economy, and society.

Modern Factory System

An approach to manufacturing that involves large-scale, mechanized production methods, often under one roof or within one facility, leading to the increased efficiency and production output.

Marginalism

An economic principle that deals with the additional or marginal changes in costs and benefits for a unit increase or decrease in production or consumption.

Scarce Resources

Natural or human-made assets that have limited availability, which makes the allocation of these resources a fundamental economic challenge due to competing needs and desires.