Which of the Following Is Not True Regarding Preliminary Analytical

question 111

Multiple Choice

Which of the following is not true regarding preliminary analytical procedures performed by the auditor when planning the audit?

• A) The primary preliminary analytical procedure for stockholders' equity accounts is a comparison of current year account balances with prior year account balances.
• B) If there are unusual or unexpected relationships, the planned audit procedures would be adjusted to address the potential material misstatements.
• C) The auditor should have an expectation as to the nature and magnitude of any account balance changes.
• D) Auditors show focus on just the numbers when performing analytical procedures.

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Definitions:

Predetermined Overhead Rates

Estimated rates used to allocate fixed and variable manufacturing overhead costs to products or job orders, based on expected activity levels and expenses.

Accurate Costing

The process of precisely determining the cost of products or services, taking into account all relevant factors to ensure pricing and profitability assessments are correct.

Cost of Goods Sold

The direct costs attributable to the production of the goods sold by a company, including material and labor costs.

Work in Process

An account that tracks the costs associated with incomplete goods in manufacturing, including material, labor, and overhead expenses during the production phase.