In Evaluating the Validity of Different Types of Audit Evidence

question 288

Multiple Choice

In evaluating the validity of different types of audit evidence, which of the following conclusions is not correct?

• A) Recomputation, though highly valid, is limited in usefulness due to its limited scope.
• B) The validity of documentary evidence is independent of the effectiveness of the control system in which it was created.
• C) Internally created documentary evidence is considered less valid than externally created documentary evidence.
• D) The validity of confirmations varies directly with the independence of the party receiving the confirmation.

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Definitions:

Fixed Overhead Budget Variance

This term refers to the difference between the budgeted fixed overhead costs and the actual fixed overhead costs incurred.

Standard Fixed Manufacturing Overhead Rate

The predetermined rate used to apply fixed manufacturing overhead to products, based on an estimate of total fixed manufacturing costs and an allocation basis.

Actual Fixed Overhead Costs

The real costs incurred for fixed overhead during a specified accounting period.

Budgeted Activity

The planned level of output or activity for a specific period, used for planning and control purposes.