The Scope of an Audit Is Not Restricted When an Attorney's

question 111

Multiple Choice

The scope of an audit is not restricted when an attorney's response to an auditor as a result of a client's letter of audit inquiry limits the response to:

• A) Matters to which the attorney has given substantive attention in the form of legal representation.
• B) An evaluation of the likelihood of an unfavorable outcome of the matters disclosed by the entity.
• C) The attorney's opinion of the entity's historical experience in recent similar litigation.
• D) The probable outcome of asserted claims and pending or threatened litigation.

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Definitions:

Labor Rate Variance

The difference between the expected cost of labor at standard rates and the actual cost of labor incurred.

Raw Materials Quantity Variance

The difference between the expected amount of raw materials required for production and the actual amount used, evaluated in terms of cost.

Labor Rate Variance

The difference between the actual cost of direct labor and the expected (or standard) cost, based on the standard hours worked and standard labor rate.

Variable Overhead Rate Variance

The difference between the actual variable overhead incurred and the expected variable overhead based on standard cost.