Which of the Following Statements Is False Regarding Audit Criteria

question 390

Multiple Choice

Which of the following statements is false regarding audit criteria?

• A) Audit criteria should be consistent across audit assignments.
• B) Audit criteria should represent reasonable standards against which to assess existing conditions.
• C) Audit criteria should provide flexibility but allow identification of nonadherence.
• D) Audit criteria should equate to good or acceptable management practices.

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Definitions:

Variable Factory Overhead

Costs in a factory that vary with the level of production output, such as supplies and utilities used in the manufacturing process.

Transfer Pricing

The setting of prices for transactions between affiliated entities within the same multinational corporation, affecting taxation and financial reporting.

Factory Overhead

All indirect costs associated with manufacturing, such as utilities, rent, and maintenance, excluding direct materials and direct labor.

Cost-Reimbursement Contract

A type of contract where the purchaser agrees to pay the supplier for all actual costs incurred plus a fee or profit.