There Are Many Types of Analytical Procedures That the Auditor

question 40

Multiple Choice

There are many types of analytical procedures that the auditor can conduct during the planning stage of the financial statement audit.What is the purpose of calculating key ratios for the client's business and comparing them with industry averages?

• A)to understand the client's industry and business
• B)to assess going concern
• C)to indicate possible misstatements
• D)to reduce detailed tests

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Definitions:

Fixed Overhead Budget Variance

The difference between the actual fixed overhead costs incurred and the budgeted or expected costs, indicating overhead management effectiveness.

Fixed Manufacturing Overhead

Costs that do not vary with the level of production or sales, such as salaries of factory supervisors and rent of the manufacturing facility.

Materials Price Variance

The difference between the actual cost of raw materials and the standard cost multiplied by the quantity of materials purchased, used as a measure of cost control.

Direct Labor Variances

The differences between the budgeted and actual costs of direct labor used in production.