A Tour of the Client's Facilities Is Helpful in Obtaining

question 80

Multiple Choice

A tour of the client's facilities is helpful in obtaining a better understanding of the client's business operations because it may indicate

• A) reasons not to accept the engagement.
• B) areas of increased audit risk.
• C) areas of increased client business risk.
• D) areas of increased inherent risk.

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Definitions:

Average Variable Cost

The total variable costs of production divided by the quantity of output produced.

Total Variable Cost

The sum of expenses that vary directly with the level of production or sales volume.

Variable Costs

Costs that change in proportion to the level of activity or volume of production.

Fixed Costs

Costs that do not vary with the level of output or sales, such as rent, salaries, and insurance payments.