To Reduce the Risks Associated with Accepting Fax Responses to Requests

question 677

Multiple Choice

To reduce the risks associated with accepting fax responses to requests for confirmations of accounts receivable, an auditor most likely would:

• A) Examine the shipping documents that provide evidence for the existence assertion.
• B) Verify the sources and contents of the faxes in telephone calls to the senders.
• C) Consider the faxes to be nonresponses and evaluate them as unadjusted differences.
• D) Inspect the faxes for forgeries or alterations and consider them to be acceptable if none are noted.

---

Definitions:

Margin of Safety

The difference between actual sales and break-even sales, indicating the extent to which sales can drop before losses occur.

Variable Costs

Costs that vary directly with the level of production or volume of output.

Fixed Costs

Expenses that do not change in proportion to the level of production or sales activity within a certain range.

Plantwide Overhead Rate

A single rate used to allocate all of a plant's manufacturing overhead costs to its production activities based on a uniform cost-driver.