When the Auditor Is Gathering Evidence, If the Source of the Evidence

question 111

Multiple Choice

When the auditor is gathering evidence, if the source of the evidence is independent of the client, the auditor will conclude that the evidence is:

• A) not reliable.
• B) reliable if the provider has no reason to be biased.
• C) reliable.
• D) not reliable unless the provider is qualified to provide the evidence.

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Definitions:

Variable Costs

Costs that vary directly with the level of production or with volume of services provided.

Fixed Costs

Fixed costs are expenses that do not vary with the level of production or sales within a certain range, such as rent, salaries, and insurance.

Automated Machine

A machine operated with minimal human intervention, typically using computer-controlled systems.

Margin of Safety

The difference between actual or projected sales and the break-even point, indicating the extent to which sales can drop before a business incurs a loss.