When an Auditor Calculates Return on Assets and Compares It

question 51

Multiple Choice

When an auditor calculates return on assets and compares it with previous periods, this type of evidence is an example of:

• A) observation.
• B) physical examination.
• C) inquiry.
• D) analytical procedures.

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Definitions:

Production Function

A mathematical representation describing the relationship between input factors and the output of goods or services.

Inputs

The resources used in the production process, including labor, capital, materials, and energy.

Constant Returns To Scale

A situation in which increasing all inputs by a certain factor leads to an increase in output by the same factor, indicating proportionate scaling in production.

Production

This refers to the process of creating goods and services through the combination of labor, materials, and technology.