The Greatest Impact on Audit Effectiveness Comes from the Risk(s)

question 14

Multiple Choice

The greatest impact on audit effectiveness comes from the risk(s) of:

• A)underreliance and incorrect rejection.
• B)overreliance and incorrect acceptance.
• C)underreliance and incorrect acceptance.
• D)overreliance and incorrect rejection.

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Definitions:

Standard Hours Allowed

The amount of time that should be spent on producing a certain number of units under normal conditions.

Denominator Activity

A term used in cost accounting to refer to the level of activity used to allocate fixed costs to cost units.

Variable Overhead Efficiency Variance

The difference between the actual variable overhead based on hours worked and the standard cost of variable overhead for those hours, indicating efficiency in controlling variable overhead costs.

Variable Manufacturing Overhead Cost

The portion of manufacturing costs that varies with the level of production output, including costs such as indirect materials and utilities.